Editorial 1 : Global Trade Disorder
Context: Trump is destabilising global trade order and it’s an opportunity for India
Introduction: Dani Rodrik and Robert Lighthizer argue that free trade is a theoretical construct, akin to perfect competition in economics. Real-world trade involves regulations, costs, and strategic interests, making it inherently non-free.
Role of WTO
Established to reduce artificial barriers (tariffs, subsidies) through a rules-based system.
Enforces penalties for violations but relies on collective compliance, which has been weakened by unilateral actions.
U.S. Unilateralism and Erosion of the Rules-Based System
Undermining the WTO
The U.S. (under Trump) paralyzed the WTO’s dispute settlement body since 2019.
Use of domestic laws like Section 301 (Trade Act of 1974) to coerce trade policy changes outside multilateral frameworks.
Consequences of Aggressive Unilateralism
Trade Wars: Retaliatory measures by Canada, Mexico, and China escalate tensions.
Law of the Jungle: Weakens global trust in rules, replacing the rule of law with power dynamics.
Economic Costs: Higher tariffs raise prices for U.S. consumers and producers, potentially lowering GDP.
India’s Challenges in the Global Trade Order
Double Standards in WTO Rules
Agriculture Subsidies: India’s subsidies are deemed illegal, while the U.S. and EU provide billions in non-distortionary income support.
Special and Differential Treatment (S&DT): Denied to India (e.g. loss of GSP status in 2019 despite $2,000 per capita income).
U.S. Tariff Pressures
India reduced tariffs on bourbon and motorcycles to accommodate U.S. demands.
Strategic concessions reflect India’s dependency on the U.S. as its largest export market.
Way Forward: Strategic Recommendations for India
Domestic Reforms
Use U.S. pressure as a catalyst to dismantle protectionist policies, preparing for FTAs with the UK and EU.
Strengthen industries to achieve Viksit Bharat (developed India by 2047).
Diversification of Trade
Explore new export markets to reduce reliance on the U.S.
Leverage crises to push structural reforms (e.g. 1991 liberalization).
Multilateral Advocacy: Challenge WTO inconsistencies (e.g. EU’s Airbus subsidies) while building coalitions with other developing nations.
Conclusion: U.S. prioritizes power over rules, destabilizing the WTO-led order. India should balance concessions with strategic autonomy and should invest in competitiveness and diversification to mitigate external shocks. Trade crises are opportunities to reform, innovate, and align with evolving global dynamics.