The joy of reading PG Wodehouse is to discover two or three original similes per page that leave you marvelling at the man’s genius. Sample just one: “As an energetic Socialist, I do my best to see the good that is in him, but it’s hard. Comrade Bristow’s the most striking argument against the equality of man I’ve ever come across”.
Arvind Panagariya’s collection of mostly newspaper articles that appeared in the Indian print media over 1989-2023 are also striking arguments against equality aka arguments in favour of markets and capital within the economics discipline. Besides, the several trade metaphors that appear alongside provide keen insight into his deep and unchanging convictions about the design of trade policy. I must add a personal touch to the man’s consistency. Ever since I took his class on Trade Theory in a US University some three decades ago, his views have remained unvarying. If anything, these have been enriched by a political economy character, always based on sound free trade logic. For example, he argues vehemently against the increasing protectionism visible in the Indian economy over the last few years and says that India should eschew protection and use tariff reduction as a means to garner benefits for itself in trade negotiations. He presents a sound case of making a virtue out of necessity. Panagariya’s collection reflects this logic in not one but several articles. By and large, however, these exhortations have fallen on unresponsive ears.
Back to the charming metaphors: “Protection is skin to a skin disease, you cure it in one place and it appears on another”; “Protectionism appeals to many because its favourable impact on the output of the protected sector is immediately visible while the damage it does is spread throughout the economy and requires deeper probing”. A third: “A carbon equalising tax demand in mature economies is driven by a misguided sense of fairness and morality that unless others cut their emissions we should not be asked to cut ours. If a pastor at one’s church said to his flock, however, that it should be virtuous only if others are, that moral restraints by oneself in the presence of licentiousness by others should be rejected, his sermons would be popular but would invite the wrath of his superiors”.
I could go on, but let’s leave it at that. Panagariya doesn’t hesitate to call out India for its misguided protectionism or the West for its double standards. Along with the evolution of international trade into a more potent weapon of exporting standards, the two themes (India’s protectionism and West’s double standards) resonate throughout the book. Panagariya is not being anti-national when he points out that India should have joined the Regional Comprehensive Economic Partnership (RCEP), in fact he asserts that it is in India’s own interest to do that. Market access, inflow of Foreign Direct Investment (FDI), increased opportunities to engage meaningfully in regional value chains and, of course, improved competitiveness are some of the benefits. RCEP is thus a lost opportunity, notwithstanding the alleged costs such as potential increase in imports from China. But to deal with that we have to engage more rather than less with China. Does this sound counter intuitive? Not really. Imports from China create exports, thereby helping us slowly but steadily move up the value chain via “learning by doing”. That is what China did over 30 years. Complaining about China’s competitiveness or creating disabilities wantonly for foreign capital is a sub-optimal way to compete. In fact, Panagariya believes that the way Indian industry competed by lobbying to create disabilities for rivals has damaged competitiveness that will take several years to remedy.
Panagariya’s collection is a veritable primer in the progress and regress of globalisation. The articles are arranged by themes and ideas that are overwhelmingly relevant even today. The themes range from protectionism, bilateral trade issues between India and China and India and the US, Free Trade Agreements (FTAs) in general, the damage and potential repair of multilateralism i.e. the World Trade Organisation (WTO) to the vexatious fusing of trade with standards. In its heyday, trade negotiations were mostly about tariff reductions and only peripherally about standards. Today it’s the opposite, and Panagariya’s articles provide a glimpse into the process that made it so.
The linkage of trade and standards that extend well beyond human rights has become customary in trade negotiations and in the WTO. Whether it is environment, intellectual property, competition policy, State Owned Enterprises, the new-age agreements are all focused on these. How we got here is to be found in Panagariya’s collection that while easy to read, is far from easy to recognise. Let me elaborate: Policy advice is often criticised by “mainstream” economists as being based on opinions, rather than facts. For Panagariya, nothing could be farther from the truth. Every article in the collection is based on analysis, data and scholarship. Policy advice that flows is not drawn from thin air, but after a deep understanding of the underlying issues. Bureaucrats must read this collection and deploy the ideas to the extent possible. Serious students of trade will understand deep scholarship is a tool to elucidate, and not obscure.
Kathuria is dean, School of Humanities and Social Sciences and professor of Economics at the Shiv Nadar Institution of Eminence. Views are personal
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