Trade Wars and India's Long-Term Strategy

The world economy is experiencing trade disruption on an unprecedented scale.

- SABYASACHI SAHA

The world economy is experiencing trade disruption on an unprecedented scale. Risk perceptions on this count have always been heavily discounted in favour of globalization and orthodoxies that drive economic decisions. The opportunities of diversification (beyond narrow specializations) have generated optimism for a relatively long period of time, reflected in the fact that simple average tariffs applied by members of the World Trade Organization (WTO) on a most-favoured nation (MFN) basis have fallen below 10 per cent. Unilateral tariff liberalization by many developing countries after the WTO came into being has been, however, met with distorting subsidies, non-tariff barriers, and onerous standards in developed countries, with widening technology gaps. This the WTO could not address, causing a crisis of its legitimacy. The existence of massive distortions effectively implied that international trade remained an arena of perpetual conflict and the recent episode of unilateral action by the largest economy has rendered all previous consensus null and void; eliminated trust and negotiation capacity at the WTO; and has shaken economic globalization at its base. Hence, India needs a long-term strategy.