• 'Allow Kamal Nath to negotiate at WTO'
  Economic Times, July 29, 2008
   
• North should not grudge large, emerging economies: Nath
  Zee News, July 29, 2008
   
• India is being marginalised at Geneva: CUTS
  Economic Times, July 28, 2008
   
• Food for thought
  The Financial Express, July 27, 2008
   
• 'Let's do trade, peace will follow'
  www.jang.com, July 27, 2008
   
• 'India, Brazil unity crucial to success of WTO talks'
  Economic Times, July 26, 2008
   
• A lose-lose situation
  The Financial Express, July 20, 2008
   
• India & Pakistan: Being economically savvy yields a peace dividend
  Economic Times, July 18, 2008
   
• Allow farmers to make hay while the sun shines
  The Financial Express, July 07, 2008
   
• Economic liberalisation, globalisation create hardship for farmers: study
  The Financial Express, July 07, 2008
   
• Let's up the ante on agriculture
  The Economic Times, July 05, 2008
   
• India wants fresh WTO drafts, seeks fair deal
  The Financial Express, July 03, 2008
   

Media Archive...

North should not grudge large, emerging economies: Nath
Zee News, July 29, 2008

Food for thought
The Financial Express, July 27, 2008

By Siddhartha Mitra

The Uruguay Round of the General Agreement on Tariffs and Trade (GATT) resulted in a decline in the tariffs imposed by developed countries to negligible levels. This was a matter of considerable jubilation for developing countries as their exports could now enter developed country markets more easily. Indeed experts reasoned that in the new era of almost complete openness in trade, countries could now specialise in areas of their comparative advantage to maximise productivity and then use the exchange mechanism underlying trade to augment welfare.

Thus, it was pointed out that self-sufficiency in food grains was no longer required by a country as it could meet its food grain deficits through resources generated from exports. The only people that emphasised self-reliance in food grains were stoic nationalists, who did not want to depend on other countries for their daily bread or bow to the cold logic offered by economists. The subsequent turn of events has vindicated the stand taken by such nationalists and defeated the cold logical arguments offered by pedants.

The above developments can be explained in the following manner. When developing countries pulled at and demolished the traditional system of tariff barriers to trade, they expected easier entry of their primary products into developed countries. Instead, most developed countries came up with an even more deadly and sophisticated set of barriers to agricultural trade which were promoted under the garb of national self interest. These were termed as Technical Barriers to Trade (TBT) and Sanitary and Phyto-Sanitary (SPS) Measures. TBT were linked to product and process specifications. For example, using such restrictions an export consignment of mangoes can be returned if they are not of a certain hue or size or if the processes used for cultivation have not met certain requirements.

SPS measures on the other hand try to anticipate the danger caused to human, plant and animal health by export consignments through tests for concentrations of chemicals and pesticide residues. A ceiling is set for concentrations of residues in consignments. Consignments which exhibit concentrations exceeding this ceiling are returned to the country of origin by the importing country. These barriers have become so important that in a single year from August 2002 to July 2003, the US Food and Drug Administration rejected 630 Chinese shipments of agricultural and aquatic products. These barriers can therefore be a source of considerable loss for the exporting country.

India too has come under the hammer of such barriers and is likely to do so again and again in the future. The government has tried to tackle such barriers by promoting agricultural exporting zones in select crops. These zones try to encourage organic cultivation of cash crops, fruits and vegetables as such cultivation does not involve the use of chemical fertilizers and pesticides and therefore minimises the chances of rejection of exports because of SPS and TBT regulations.

It must be remembered though that organic cultivation is not only more labour intensive than conventional cultivation, but also involves un-remunerative crop rotation which diminishes income of the farmer. Moreover, organic yields are often lower then conventional yields. Further, the price premium provided for organic produce in international markets often is not high enough to compensate for the various increases in cost that a switch to organic farming entails and justify such cultivation for exports. The silver lining is that niche markets for organic products are projected to grow in the immediate future and price premiums being offered for them are also likely to widen.

The implication of the above discussion is that a country cannot rush headlong into specialisation in crops for export. Given the various cost increases that a switch from conventional to organic farming involves, the decision to produce organic crops has to involve a careful comparison of underlying costs and benefits. The decision to farm organically for export should be taken only if the benefits over-compensate the attendant costs. Thus, the above considerations dictate that crops can be cultivated for agricultural export only to a limited extent. In cases where the price premium being offered for organic produce in the international market does not compensate for the decrease in yields caused by a switch to organic farming or the attendant increases in costs, such a switch is not justified.

Thus, the traditional argument about focusing on areas of comparative advantage does not go through in the changed scenario as this very comparative advantage has been distorted by the mentioned non-tariff barriers. Therefore, a large-scale switch from food grain cultivation to export-oriented production which would then pay for resulting food grain deficits is no longer feasible. Indeed such a strategy could be dangerous and result in a massive net drain of foreign exchange reserves with the inflows from agricultural exports nowhere matching the outflows due to food grain imports.

To conclude, the need for self reliance in food grains still holds in today’s seemingly open but much more strategic world. The stoicism of nationalists emerges triumphant over the cold logic of the economic rationalist. In economics, like in life, the heart should sometimes be allowed to rule over the head.

The author is Director (Research), CUTS International, a leading research, advocacy and networking group and can be reached at sm2@cuts.org

interview
'Let's do trade, peace will follow'
www.jang.com, July 27, 2008

By Shahzada Irfan Ahmed

Pradeep S Mehta is the founder secretary general of the Jaipur-based Consumer Unity & Trust Society (CUTS International), one of the largest consumer groups in India established in 1983-84. It has overseas centres in London, Geneva, Lusaka, Nairobi and Hanoi.

Mehta has also served on several policy-making bodies of the Government of India, related to trade, environment and consumer affairs, including the National Advisory Committee on International Trade of the Ministry of Commerce and its working groups. Besides, he chairs the advisory board of the South Asia Network on Trade, Economics and Environment, Kathmandu and has also been an NGO Adviser to the Director General, WTO, Geneva, Switzerland.

Recently he was on a personal visit to Lahore during which The News on Sunday got a chance to interview him in the backdrop of Pak government's decision to increase imports from India. Excerpts follow:

The News on Sunday: The PPP government is being criticised for announcing an 'India-centric' trade policy while many outstanding issues between the two states remain unresolved. What would you say on this?

Pradeep S Mehta: First, let me congratulate the Government of Pakistan on this visionary, bold and pro-Pakistan step. However, I would like to make a correction. It was Pakistan, sometime ago, under President Musharraf which first decided to put other bilateral matters on hold and concentrate more on bilateral and regional trade. This means even an army chief had to change his stance and focus his attention on issues related to trade and other fields where the people of the two countries could cooperate. About the second part of the question I would say the trade policy of Pakistan is not at all country specific. I feel the decision has been taken only for the reason that cheap imports from India, especially those of industrial raw materials, are the best option the country has to stay competitive in the international market, and also curb inflation.

I don't want to say that the two countries must forget the outstanding issues between them. What I am suggesting is that these countries must not link mutual trade with the resolution of some difficult issues. I am sure peace will follow if trade is allowed to grow freely. You may call it 'peace dividend' if you want to use a pure economic term. This is by no means a utopian thought. Brazil and Argentina, who were once at daggers drawn with each other, had to abandon their nuclear programmes and concentrate mainly on mutual trade. As a result smaller neighbouring countries of that region have also benefited.

TNS: Pakistan already has a yawning trade deficit with India which may increase manifold if the said trade policy is implemented. How do you think can Pakistan overcome this worry?

PSM: Here I would try to remove a misperception that trade deficit is detrimental to an economy's growth or survival. What if Pakistan has trade deficit with India? It also has a trade deficit with China. The United States has had trade deficit with the rest of the world, forever. Even China has trade deficit with India. It's a fact that out of the $30 billion India-China trade, Indian exports have an overwhelming share. China imports cheap raw material from India and sells the finished goods to the world. I think Pakistan can also benefit from the import of cheap Indian raw materials and minimise the ever-increasing costs of production its industry is burdened with.

Another count on which Pakistan can gain a lot is the transportation cost. The cost of transporting goods from the neighbouring India is much cheaper than getting them from distant countries. With global fuel prices constantly on the rise the transport cost factor is becoming more and more significant. About the import of cheap finished goods, it is very much expected that some businesses will shut down for being non-competitive. It happened in India too, when we had to liberalise the import of consumer goods. But at the same time the end consumers will have the opportunity to buy cheaper goods. Everywhere in the world imports are used to control prices and promote healthy competition.

TNS: There is a perception among many Pakistanis that the goodwill measures have been one-sided. They say while Pakistan is opening up its market, India has not shunned its habit of imposing non-tariff barriers on imports from Pakistan.

PSM: The perception is very much there on both sides of the border. But the fact is that they are mostly the sector lobbies that try to protect their interests by pressurising their respective governments. For example the Indian cement industry opposed cement imports from Pakistan on grounds that the product does not meet international quality standards. But finally the imports were allowed. My point is that if Pakistanis are using the same cement and their buildings are not coming down, there's no harm importing it. Similarly the Pakistani sugar industry kept on propagating for long that Indian sugar has excessive phosphorus content which is harmful to health. Here I would say if Indians can consume the same sugar without getting affected why can't Pakistanis have it. Some imports have often been opposed on religious grounds. In this respect I would say if the Arab states can import packed buffalo meat why can't any other Muslim country. In the overall context, if Pakistan liberalises imports from India, let me assure you that India will not lag behind. With the high growth in India, the market is huge and can absorb many goods from Pakistan, whether intermediates or finished goods.

TNS: How helpful can import of fuel from India be for Pakistan? Do you think the two countries can work together to overcome the deepening energy crises especially that faces Pakistan?

PSM: Here I would try to remove a misperception that trade deficit is detrimental to an economy's growth or survival. What if Pakistan has trade deficit with India? It also has a trade deficit with China. The United States has had trade deficit with the rest of the world, forever. Even India has trade deficit with China. It's a fact that out of the $30bn India-China trade, Chinese exports have an overwhelming share. China imports cheap raw material from India and sells the finished goods to the world. I think Pakistan can also benefit from the import of cheap Indian raw materials and minimise the ever-increasing costs of production its industry is burdened with.

Another project that can bring India and Pakistan closer and help meet their energy needs is the proposed gas pipeline that will come to India from Iran and pass through Pakistan. Pakistan will be able to earn a huge rental if this project gets through as well as get its share of the natural gas passing through it. India cannot sell electricity to Pakistan as it is facing energy crisis itself. It is as severe as the one haunting Pakistan. It's a fact that hardly 10 years back India was planning to buy 500 megawatt electricity from Pakistan. It is strange that the same country, which had surplus energy at that time, is unable to meet its domestic needs. Down the line, new investments in the power sector in Pakistan did not happen. That is something which your government should address more seriously.

TNS: You seem quite optimistic. But how can you convince those who fear smaller economies in South Asia will collapse due to India's exponential economic growth?

PSM: This is another Cassandraic and poorly-argued thought. All economies of the region can ride on the bandwagon of India's huge economic growth and gain. That has been the experience around similar situations. Let me take the example of Vietnam which is growing at 10 percent per annum for long, in spite of the giant China. One critical factor is that the government in Vietnam has kept their economy open, rather than close it to competition. This only goes on to prove my point. Saath chalen gay tu sab ka fayda hoga! 

(Revised on: August 08, 2008)

This interview can also be viewed at: http://jang.com.pk/

A lose-lose situation
The Financial Express, July 20, 2008

By Siddhartha Mitra

Agriculture is often characterised by poverty in plenty. The reason is that people have largely fixed levels of intake of staples such as rice and wheat; thus, abundance is often counterproductive for suppliers, leading to such a steep market clearing fall in prices that farm revenues often decline. Interestingly, climate change and the grim predictions of associated scarcity should analogously imply prosperity for farmers as consumers bid up prices to maintain their daily intake. The stickiness in consumption of staples might imply a really substantial increase in prices — so significant that revenues of farmers and, therefore, their net incomes might go up despite a yield decline.

Predictions of yield decline due to climate change suggest a figure of 6% of present levels for temperate developed countries and as much as 20% for tropical developed countries. For developed countries like the UK and US, the associated price increase might be a mixed blessing with grumpy consumers and buoyant farmers. But we cannot jump to such predictionsfor India.

Given that our agricultural marketing system is still driven by a long chain of intermediaries, who monopolise positions in the marketing chain to siphon off a large amount of the consumer expenditure on farm products, any large increase in retail prices would be dampened by the time they reach the farm gate. Thus, for example, consider a Rs 10 per kg increase in the retail price of rice. In a developed country almost this entire price increase would benefit the farmer. However, in an intermediary ridden farm economy like India only a moth-eaten price increase, of say Rs1, results at the farm gate. This really would not compensate the farmer adequately for the yield decline; while farmers from the developed world benefit those from developing countries like India might be in a sorrier state.

Thus, in countries like India there is no silver lining to the clouds of ‘climate change’ — its leaky agricultural economy would