06 August 2004, Business Standard

T C A Srinivasa-Raghavan / New Delhi August 6, 2004

Few things are as frustrating as attempts to fathom how civil servants in the commerce ministry make trade policy.

In the end one withdraws because, until recently at least, they had little idea either of the dynamics of international trade, or the imperatives of trade policy.

Things seem to have improved a bit in the past few years. The Indian approach to trade policy has become a whisker more sophisticated. BJP rule helped a lot because the old Congress notion that the world owed India a living — now revived partially — hampered even those negotiators who understood international trade (and there weren’t many of them).

In a recent pamphlet* Julius Sen, himself a member of the IAS, has dwelt at length on the subject. The pamphlet is drawn from his Ph D thesis, which he is completing at the London School of Economics.

Basically, says Sen, the problem is an institutional one because the commerce ministry doesn’t really know what it is doing. “the.. ministry… is firmly embedded in the domestic political culture, which accords little importance to principles of free trade within the domestic context.”

Since there is no one ministry that deals with domestic trade, says Sen, international trade policy is at sixes and sevens with what is going domestically.

Furthermore, at the state level, where trade policy has to be actually implemented, there is neither any idea of nor expertise in international trade policy.

This point was first made by Dr Kripa Sridharan of the National University of Singapore in a paper called “Federalism and Foreign Relations” published in the Asian Studies Review. The result is often a dog’s breakfast posing as national trade policy.

One of the most telling points that Sen makes is in respect of the Uruguay Round. After it was completed, he says, “there is no evidence that the Cabinet Secretary sat down and said something to the effect that new consultative and decision-making procedures would be needed to deal with this new and complex form of policy making.”

This is not the only problem. Is it not odd, asks Sen, that it is India alone that struggles so much with trade policy when other similarly placed countries deal with it far more sensibly? “Possibly, the lack of consensus on the very idea of trade as the engine of growth accounts for this.”

So what should be done? Sen has several suggestions, all mostly dealing with the need to improve the institutions of trade policy. One of the more important ones, perhaps, is to make the Planning Commission the nodal body. The idea is certainly worth discussing.

As Sen rightly points out, the Planning Commission has the wherewithal in terms of technical expertise and the operating experience with the states. It will certainly do a far better job of coming up with a coherent trade policy than the commerce ministry does or ever can.

Now that Anwar-ul Hoda, a trade specialist par excellence has joined the Commission, he could push it. He certainly has the credentials. Since Hoda has been at the commerce ministry, he knows what is wrong with it; he has been at the World Trade Organisation (WTO) as a deputy director general, so he knows what makes that place tick; and now he is at the Planning Commission.

Even without getting such a mandate, perhaps he can persuade the Commission to start educating the politicians that trade is not a zero-sum game. More than anything else, at the political level it is this mis-perception — that India always loses — that results in posturing and then policy.

At the bureaucratic level, the real problem is to end the turf war between the commerce ministry and the external affairs ministry. Each regards the other as made of HPS (hand-picked and selected) idiots.

*Trade Policy Making In India: The Reality Below the Waterline, CUTS, Jaipur www.cuts-international.org