Boosting trade is the only game in town


The Economic Times (India)
Comment – by Catherine Ashton
August 31, 2009

This week, trade ministers will gather in Delhi to set the future course of multilateral trade negotiations. The commitment of most of the world’s economies to open trade has been made clear, and by and large countries have not resorted to new protectionist measures. What is missing is serious movement to find new opportunities for trade as a way to lift countries out of the current slump and help get the world economy running again.

India has already joined the EU and others in playing a leading role in freeing up global trade. The country has benefited from greater integration with the world economy, with sectors such as software and high-tech services showing resilient export performance even during the economic crisis. Still, more than other growing Asian economies, India’s impressive growth in recent years has been driven by domestic demand. It therefore particularly stands to profit from new trade opportunities.

So far, a returning government in Delhi has shown initiative and energy, offering to host the ministerial meeting on the Doha Round and seeking to move forward bilateral trade talks with the EU and others. I welcome my counterpart minister Anand Sharma’s resolve and I look forward to working with him.

As Mr Sharma has pointed out, a fair and satisfactory outcome to the Doha trade negotiations is important if we are to break free of the economic crisis. The European Union and India must work together to make this happen in 2010 — by leading the WTO membership into the end game of the negotiation. To do so, WTO members need to pick up the discussions on agriculture and industrial goods where we left them in 2008, and give negotiators the necessary flexibility to close the outstanding issues.

We must also move on the wider range of key areas that should be part of the final deal. India and the EU have common interests here, and have already worked together effectively in some of these: on services, rules, bio-diversity and geographical indications. We need to redouble our efforts, especially on services, the fastest growing sector of world trade. Constituting 55% of its exports, this is one area where India should be keen to find a deal.

The way forward on Doha should include a “roadmap” with the WTO Ministerial meeting at the end of the year in Geneva giving the negotiations an additional push. Doha should also be a key part of the debate at the G20 in Pittsburgh, which will focus on promoting world economic recovery.

The stakes are high: securing a Doha deal would favour a quick and smooth recovery — without additional fiscal costs — by injecting a significant boost to the global economy. It will above all play an important role in the fight against poverty as it will create the potential for more economic growth and employment. Significantly, an agreement would reform agricultural subsidy programmes throughout the developed world, an important boost for farmers in developing countries.

At the same time, if we fail to conclude a deal we risk a global economy under siege: trade-distorting measures have already started to emerge and they may spread further. The sooner we close this deal, the sooner we will safeguard the global economy against the threat of protectionism. This will strengthen the multilateral system, giving us the confidence to meet other common global challenges, such as climate change.

Besides Doha, I also look forward to working closely with Mr Sharma in order to drive forward our bilateral trade agenda, and in particular our negotiations for a comprehensive trade and investment agreement. The proposed deal would represent a landmark agreement between the world’s largest trading bloc and a major emerging economy. Because the agreement would liberalise trade further in a broader range of areas it can be a robust complement to the Doha Round.

By deepening our economic integration, both the EU and India stand to gain new markets for our goods and services. At just over e60 billion a year, EU-India trade is important but still far short of our potential. To put it in perspective, our bilateral trade is less than one-fifth that of the EU’s trade with China. An ambitious agreement would help us realise this untapped potential by significantly enhancing our bilateral trade and investment flows and by making it easier to do business with each other.

The collaboration between Bosch and Tata Motors is a good example of successful joint efforts, launching a product as distinct and innovative as the Tata Nano. I believe that an ambitious bilateral agreement will lead to many more such success stories.

As we gather in Delhi to discuss the way forward for the Doha round, some see signs that the global crisis is bottoming out. But even as output picks up, unemployment is on the rise and world trade is still in a slump.

Concluding valuable trade deals — multilateral or bilateral — would prove that we can reconcile the legitimate aspirations of developing countries with the expectations of the developed world and create a path for sustainable growth.

(The author is European Commissioner for Trade)

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