Business as usual

By C. Rammanohar Reddy

THE UNCERTAINTY about the outcome of the U.S. presidential elections has put on hold the usual analysis of what the new administration will mean for India. Yet, this need not be the case, for, whoever eventually comes through the electoral (and possibly the legal) process, Mr. George W. Bush or Mr. Al Gore, there will be a basic continuity in one very important area - trade relations. There may be a difference in emphasis between the two when it comes to attitudes towards the Comprehensive Test Ban Treaty or on when to lift sanctions. However, in trade policy there will be no let-up in the pressure to open the Indian market to U.S. goods and services. Notwithstanding the new bonhomie in bilateral relations, neither a President Bush nor a President Gore will oversee a major change in trade policy towards India.

This particular election has seen a noticeable shift in the attitudes of the Indian policy-making establishment towards the Democrats and the Republicans. Where traditionally it has seen a Democrat President as likely to be more ``sympathetic'' to India, this time there has been a significant endorsement locally (for whatever that is worth) of the Republican Mr. Bush rather than the Democrat Mr. Gore. A new orthodoxy is taking hold that India has usually had better dealings with a Republican in the White House. This is perhaps a superficial reading of the history of Indo-U.S. relations (remember the Republican President Nixon's nuclear sabre-rattling in 1971?). But the current shift in the Indian policy-making establishment is also based largely on perceptions about the positions the two candidates will take on the CTBT, sanctions and Sino-U.S. relations. But even when it comes to trade policy there is this (wrong) reading that Mr. Bush ``will be better for India'' than Mr. Gore because, among other things, a Democrat President will oversee a more protectionist U.S. than a Republican one.

The history of U.S. trade policy in general and towards India in particular over the past two decades does not permit any simplistic interpretation about more accommodating trade relations with a Republican administration rather than a Democratic one. Successive administrations under both parties have exerted the maximum pressure possible to open the way for U.S. trading interests even as they have done their best to protect those economic sectors susceptible to import competition.

Consider first U.S. attitudes towards India at the former General Administration of Tariffs and Trade and now the World Trade Organisation. It was under the Republican President, Mr. Ronald Reagan, that in 1986 the U.S. wore down the opposition of India (and Brazil) at GATT to put intellectual property rights and services on the agenda of the Uruguay Round of multilateral trade negotiations. It was during the Presidency of the senior Mr. George Bush that India and Brazil were given the honour in 1989 of being the first countries to be put on the Special 301 provisions of U.S. legislation that sanctioned unilateral trade action. It was in the same Republican administration that the then U.S. Trade Representative, Ms. Carla Hills, used the ugly expression of taking up a ``crowbar'' to break open the doors to developing county markets. And it was under Mr. Bush Sr., again at the GATT, that the U.S. in 1990 succeeded in breaking the remaining Indian resistance to a tightening of domestic patent laws on pharmaceuticals and other products. This was eventually enshrined in the now infamous Trade-Related Intellectual Property Rights (TRIPS) regime of the GATT/WTO.

A process that began under the Republican presidencies of Mr. Reagan and Mr. Bush was, of course, completed under the Democrat President Mr. Bill Clinton, when the GATT Agreement was signed in 1994. In many respects Mr. Clinton has continued where the Republicans left off and added new kinds of crowbars in dealing with India on trade. The best example is the U.S. stance on the issue which Indian industry now fears the most - the removal of all quantitative controls on imports next year. In 1997 an Indian proposal at the WTO to phase out quantitative controls and replace them by import tariffs over a period of six years was eventually agreed to, after much negotiations, by the European Union, Japan, Canada and all other major trading powers - except the most important one, the U.S., which wanted an accelerated removal of all controls. The U.S. dragged India through the WTO's dispute settlement process and though India lost the case, for some mysterious reason, it chose not to have the decision on the phase-out arbitrated and was instead persuaded by the U.S. to remove all quantitative controls by April 2001. If the U.S. had not been so intransigent and had joined all the other economic powers in agreeing to the Indian plan, the existing controls would have been removed only in 2003 and domestic industry would have had another two years to prepare for import competition.

A qualitatively new aspect of trade policy that has emerged under the Democrats is of course the insistence that the developing countries adhere to minimum environment and labour standards in the products they export. India, as also China, Malaysia, Indonesia, Pakistan and other large developing countries are the targets of this initiative. The high point (nadir actually) of this demand was reached last December when Mr. Clinton dared to threaten sanctions on those countries that did not follow certain labour standards. While that only served to strengthen the developing country opposition at the WTO and contributed to the wreckage at the Seattle ministerial meeting, there was little doubt that a new crowbar was now being added to U.S.' armoury. Although the U.S. drive was blocked at the WTO, it has quietly begun incorporating such labour and environment standards in bilateral agreements - most recently in a free trade pact with Jordan.

One of the reasons why Indian pundits say a Bush presidency will be better for India is that Mr. Gore, because of his past claims to protect the environment and because he is indebted to the unions, is sure to push the environment-trade and labour-trade linkages much harder bilaterally and multilaterally. That may well be the case. A possible pointer to the future is that Mr. Gore praised the labour clauses in the U.S.-Jordan agreement while the Republicans were critical. However, the domestic pressures from the environment and labour groups - acting at times on behalf of protectionist interests - will not disappear in a Bush presidency. These demands are now on the table and whoever becomes President will keep pressuring India and the other large developing countries to incorporate labour and environment linkages in global trade.

All told whether it is going to be Mr. Bush or Mr. Gore there will be an essential continuity in U.S. trade policy towards India, with same pressures as before continuing to operate to press for greater access to this ``vast'' market. There will be modulations but they will be only that, small differences. With a fractured House of Representatives and Senate standing guard over the President, it cannot be otherwise even in a Republican administration. So Indian ``punditry,'' to borrow Mr. Bush's term, which expresses a preference for one or the other of the two candidates who continue to do battle is off the mark at least in terms of trade policy towards India.

What the third candidate in the U.S. elections, Mr. Ralph Nader, said about the domestic stances of the Democrats and Republicans could just as well apply to trade policy towards India over the next four years: ``The two parties have morphed into a corporate party representing the same business interests at the same dinners, at the same hotels, day after day after day.''

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