New Delhi: India’s new commerce and industry minister Suresh Prabhu will face his first big challenge of defending multilateralism and securing India’s interests at the upcoming ministerial meeting of the World Trade Organization (WTO) in Buenos Aires starting 10 December. In an interview, Prabhu talks about his strategy for WTO, China and free trade agreements (FTAs). Prabhu also hopes to use exports as a tool to create employment opportunities in India. Edited excerpts:
In the previous Nairobi ministerial of WTO two years ago, the Doha Development Agenda could not be affirmed unanimously. Will we see the proverbial final nails in the coffin of Doha round in Buenos Aires?
Nothing dramatic happens in every WTO ministerial, particularly today when the global economy is not as sound as it was, when the US has certain strong position on the entire multilateral institution, when there is still an overhang of the previous rounds of negotiations on this ministerial. We should be very realistic about the ministerial in Buenos Aires. At the same time, we are not giving up the issues. Doha Development Agenda is very much there and is an important component of the WTO agenda. I have talked to at least 40 ministers about it.
So we will not agree to a new round of WTO talks?
There is no question about it. I said very clearly at the Marrakesh mini-ministerial that before adding any new issues, let us deal with the issues that are already on the plate. Those issues are development issues.
What about new issues like investment protection and e-commerce?
There are issues that every country puts up. But there is a difference between issues raised and negotiations. Issues raised can be anything, issues for negotiations should be the ones upon which there is agreement and they are part of the work programme.
Fisheries subsidy is one of the possible deliverables at the Argentina ministerial. How are we going to protect our interest on this matter?
We are very clear that traditional fishermen should not be subjected to any conditions as such. They should be free to do what they do. Fisheries should be sustainable. There should not be overfishing. Even when you do overfishing in deep sea, that affects the coastal fishermen also because fish travel from one place to the other. This is something that will benefit India.
After you took charge in the ministry, you talked about an agriculture export policy. Government recently imposed Minimum Export Price (MEP) on onions. Do you think a consistent agriculture export policy is possible given our focus on meeting domestic demand?
Work has already started regarding this. Having a policy does not mean import and export will not be subjected to change. It is always possible. Protecting the vulnerable, whether farmers or consumers is part of public policy. Sometimes, it is challenging. Therefore, public policy has to be done in a proper way, that’s why we are consulting as many stakeholders as possible. I have already met some farmers’ organizations and some agricultural experts. It is necessary that India has an agri-exports policy because doubling farmers’ income can be achieved through exports in a short period of time.
India has a huge trade deficit with China and consistent pleas by India for more market access have not yielded any result. What strategy you will follow vis-a-vis China?
This is the first significant change that has happened in our bilateral relationship. I have met my counterpart in China in Manila after becoming the commerce minister. I told him this is unsustainable, we run huge trade deficit with you and it is not going to work. After some convincing, they have agreed to look at each and every sector, wherein we can actually export more by giving more market access, thus reducing trade deficit in a phased manner. I have already set up a task force which is chaired by the commerce secretary from the Indian side, I have requested the Chinese side to appoint somebody, they were busy with their party Congress and they have said they will do it very quickly. They will start meeting to make sure that it happens. I have told all export promotion councils to give ideas to this task force.
India is negotiating a FTA with Regional Comprehensive Economic Partnership (RCEP) members. Does an RCEP agreement without a strong services pact make sense for India?
We are already pushing for it. Our strong view is that global trade must include global trade in services. There is more and more servicification of manufacturing also. We are very keen that services is part of RCEP.
While India has yielded access to its huge domestic market to trade partners in goods under FTAs, it has never been able to include strong services pacts in FTAs where it considers having an advantage. Do you think we need to be more careful while signing FTAs henceforth?
Generally, we have to be always careful when we sign an FTA. I have asked my colleagues to prepare a proper standard operating procedure before signing an FTA. We are negotiating quite a few FTAs like Sri Lanka, Canada, European Union (EU), and Colombia, where we will follow the procedures. Along with that, services trade will be our strong policy parameter. We have realized that services trade can actually grow at a much faster rate than goods. Services speak languages unlike goods, so we need to have proper geographical strategy. We are also in the process of identifying new services which can be exported including professional services, business services. For example, have you thought about homecare services? Japan with whom we have an FTA has (an) aging population. They need homecare services that can be both onshore and offshore. From here, one can also enquire in Japanese “Aunty, have you taken your medicine?”
How do you plan to use exports as a tool to create more jobs?
In my first day in office, I decided we will create a policy for exports and employment. We have asked NITI Aayog to prepare a study for it. They have already done some preliminary work. The propensity to create more jobs in exports is far higher than any other activity.
Do you think Indian companies are risk-averse to explore new markets outside India?
Indian industry’s low capacity utilization can improve dramatically with export taking place. With exports, even if industry can recover its variable cost and only a part of its fixed cost, they still can make profit because their capacity utilization is low. Industry can outbid their competitors in global markets because they will be selling items at a cheaper rate. I have met four industry associations and they said they have not thought about it. I have told them to think about and come back for any support they may need from us. This will give us huge benefits: capacity utilization will improve, production will go up, exports will increase, employment will be created, trade deficit will also be addressed.
In the recently concluded Trade Policy Forum with the US, both sides failed to come out with a joint statement. Has our trade relationship with the US entered an uncertain phase?
We deliberately didn’t bring it out. We both published statements separately and the tone of the statements are same. Commerce Secretary (Wilbur) Ross told me that “we don’t want to reduce trade deficit with India by reducing your exports to the US, rather by increasing our exports to India.” This is a significant statement. That means our exports are protected. I gave him an example. We are going to buy 1,000 aircraft in the next few years. I am not saying we will buy from the US, but there is a market. I said please look at these issues with the future in mind. When India’s GDP will be $5 trillion, these numbers will dramatically change.