Success in trade talks with regional blocs will require flexibility

Montek Singh Ahluwalia, former deputy chairman of the Planning Commission, and currently Distinguished Fellow at the Centre for Social and Economic Progress (CSEP), tells E. Kumar Sharma that India needs to have a flexible approach for an early conclusion to the Bilateral Trade Agreement with the U.S., and FTAs with the EU and the UK.

- Montek Singh Ahluwalia, former deputy chairman of the Planning Commission, and currently Distinguished Fellow at the Centre for Social and Economic Progress (CSEP)

He also shares his thoughts on a range of other issues—from the challenges confronting the pharmaceutical industry, China's push to move away from dollar-based settlement and whether there is a case for carbon taxation in India. Excerpts:

You have said that the way forward for India in global trade is to join regional blocs. In which of these do you see better prospects for India and how should it approach the negotiations?

The need to join trade blocs is a no-brainer. We have traditionally favoured liberalising trade through multilateral trade negotiations (MTNs) conducted under the aegis of the World Trade Organization (WTO), but most of the developed nations have now given up on MTNs. They found it very difficult to get agreement with all 194 countries but most importantly they also felt that negotiations in WTO focussed on tariff reductions whereas they were increasingly concerned about "behind the border" issues such as labour standards, phytosanitary standards, patent rights, environmental issues and investor protection. The result was a proliferation of plurilateral agreements which are typically "deeper" than the traditional free trade agreements (FTAs) because they include agreements on behind the border issues.

If we want to ensure access to these markets, we need to join these blocs. In this context, it is good that we are currently engaged in discussing a Bilateral Trade Agreement (BTA) with the U.S., and FTAs with the EU and the UK. But we must also realise that to succeed we will have to be more flexible.