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India should be part of regional trade agreements: Prof Amita Batra

Global trade trends have seen significant shifts in the last 20 years, said Dr Amita Batra, Professor, Centre for South Asian Studies, Jawaharlal Nehru University, while delivering a lecture on ‘Evolving Trade Architecture in Asia: Relevance for India’ in New Delhi.  
Mar 12, 2019
 
Global trade trends have seen significant shifts in the last 20 years, said Dr Amita Batra, Professor, Centre for South Asian Studies, Jawaharlal Nehru University, while delivering a lecture on ‘Evolving Trade Architecture in Asia: Relevance for India’ in New Delhi.
 
Pointing out that the global trend recorded the highest growth in 2017 since 2011, she dwelt on the factors that aided in the rise of global trade from 2002 to 2011. Among them the rise of East Asia was the first factor. This was the phase where the increase in trade was driven by developing countries with trade being concentrated in three major hubs – Europe, North America and East Asia where the latter accounted for 13 per cent of world trade.
 
The second important factor was the rising importance of China. Though China’s intra-regional trade recorded comparatively lower figures, it was because of its share of trade with countries outside the region and, since 2002, its market share in global that trade has increased by five per cent. She said during the same period India has also experienced an increase in its market share, though only by one per cent, in the last five years of the decade between 2002-2011.
 
The third factor was how intermediate goods became part of the Global Value Chain (GVC) during this phase of trade growth. And they accounted for 40 per cent of global trade in 2011. During this period, East Asia accounted for 70 per cent of global exports in office machinery, the most dynamic sectors in cross border value chain led trade. In this sector, China gained 17 per cent of the share at the cost of some other nations losing their place. Bangladesh and Vietnam were able to significantly increase their share in the segment of textiles and apparels which was a relatively less dynamic sector. India’s share remained constant at about 5 per cent during this period.
 
Prof Batra also mentioned the importance that the Information Communication Technology (ICT) revolution, China’s accession to WTO and its FDI strategy aided in the global trade led by value chains and networked production.
In 2012 global trade witnessed a slowdown due to declining demand from advanced economies and emerging economies where they were exporting much less as they were consuming more of what they are producing. Giving the example of China, she said, China’s consumption was up from four per cent of world consumption in 2007 to 10 per cent just a decade later. China was undergoing a structural transformation with a change in GVC participation.
 
Prof Batra noted that the trade slowdown also reflected GVC restructuring.  She saidd that the GVCs have evolved to an extent where they are “less trade intensive, more knowledge intensive and rely on highly skilled labour”.
 
Looking at the larger picture, she said policies will get implemented better if more countries participate in multilateralism. However, she noted that there has been little progress in the World Trade Organisation (WTO) in the last few years with the organization itself under threat with the US delaying appointment in the appellate body. In such a scenario, she said Preferential Trade Agreements are the next best option. They will help lower trade costs and allow for common cross border discipline to come into existence.
 
In her concluding remarks, she stressed that India’s participation in GVCs has been low and its exports remain concentrated in standard labour-intensive sectors with its share in the predominant export sector, textiles and apparels having remained largely constant.
 
She said India’s participation in Preferential Trade Agreements will provide the possibility of GVC entry and the country will finally be able to take advantage of regional partnerships like Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
 
Responding to a question asked by the Chair, Dr Shankar Acharya, former Chief Economic Adviser to the Government of India, whether  Indian negotiators sitting at the high tables understand the value of GVC, she said Indian trade negotiators are guided more by industry interests.
 
The talk was organized by the Society for Policy Studies in association with India Habitat Centre.

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