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Era of trade liberalisation 'over' in the West

"The closing or even tightening of borders is very unwelcome indeed"

Pattrick Smellie
Mon, 14 Nov 2016

A generation of trade liberalisation "as we know it" is over, says Shashi Tharoor, a leading Indian political and international figure, visiting New Zealand today.

However, the trend against globalisation is a western phenomenon, not matched in developing economies, he says.

A guest of the India Trade Alliance for a series of meetings in Auckland, Tharoor told BusinessDesk he believes a bilateral free-trade agreement between New Zealand and India is possible but that "trade liberalisation as we knew it for a generation is over" following the Brexit vote and Donald Trump's presidential win in the US on an anti-globalisation ticket.

"Bilateral or sub-regional agreements might supplant them (multi-country FTAs)," he said, claiming India was "very" keen on the potential for the Asean-led proposal for an alternative to the Trans-Pacific Partnership, known as the Regional Comprehensive Economic Partnership (RCEP).

"I think New Zealand and India will be able to negotiate a bilateral trade agreement, since a global or even trans-Pacific one is not likely to happen in the foreseeable future," said Mr Tharoor, a former United Nations deputy secretary-general, former cabinet minister in Indian governments led by the Congress Party, but who is no longer a member of the governing party of current Prime Minister Narendra Modi.

Mr Tharoor remains influential as chairman of the Indian Parliament's external relations committee and because of his international experience and deep connections to some of India's wealthiest entrepreneurs, including Infosys founder Nandan Nilekani, who visited New Zealand early last year.

His comments come as Prime Minister John Key prepares to travel to the annual Apec leaders' summit in Lima, Peru, later this week, where the likely demise of TPP following Donald Trump's win last week will be discussed. Mr Key led a trade mission to India last month where Modi agreed to inject life back into stalled FTA discussions with New Zealand.

The Chinese president, Xi Xin Ping, who will attend the Apec summit, late last week began talking up the prospects of an Asia-Pacific trade agreement that excludes the US, following Trump's election and the widespread expectation that TPP will now either be abandoned or lie dormant ahead of a renegotiation intended to meet Trump's belief the trade and investment pact is a weak one for the US.

Unlike TPP, RCEP and the proposed Free Trade Area of the Pacific proposal, could be expected to include China and India.

"India and other developing countries have benefited from globalisation, which has contributed to overall economic growth, the reduction of poverty and a general rise in living standards."

While there were always critics, "they do not have an important audience either in the government or the mass media" and India – once highly protectionist – was moving to opening up its trade with other countries, although rising protectionist sentiment could prompt reversals.

"Seeing others adopt the very policies we had begun to abandon could prompt some to apply the brakes," he said, expressing concern also about the rise of opposition to migration from developing to developed economies.

"The closing or even tightening of borders is very unwelcome indeed," said Mr Tharoor. "We can't have a world in which rich countries insist on the unrestricted flow of capital across borders but labour-providing countries find their human resources can't cross in the other direction."

Mr Tharoor said also that an India-UK FTA, which could emerge as Britain prepares to leave the EU and create new global trading relationships, could potentially expand to include other Commonwealth countries.

"While India is certainly contemplating a bilateral free trade agreement with post- Brexit Britain, we would certainly be open to joining negotiations on a Commonwealth Free Trade Area, should that emerge as a viable alternative to the EU for Britain," he said.

The Trump presidency was likely to stymie global action on climate change and discourage countries, such as India, that have lagged in committing to action, to remain on the sidelines.

"President-elect Trump says he doesn't believe climate change is a real problem. I can't see any administration he leads either supporting environmental targets or credibly pressing other countries to adhere to them."

Writing for the Project-Syndicate website last week, Mr Tharoor also suggested that the American capacity to project 'soft power' through diplomacy, trade and global socio-political influence – already on the wane – would be damaged by the Trump presidency.

He encouraged New Zealand businesses to use the large expatriate Indian community as a gateway to doing business in India, where there was a huge consumer market.

"I believe there are no "no-go areas" and nothing need be seen as too har," he said. "Opportunities exist across the board – we have a vast consumer market for every conceivable product you'd like to offer Indians, from mutton to wool and butter to beer."


Pattrick Smellie
Mon, 14 Nov 2016
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Era of trade liberalisation 'over' in the West