India and the Multilateral Trading System after Seattle : Toward a Proactive Role

Mattoo and Subramanian argue that India should engage more actively in the multilateral trading system, to help facilitate and consolidate domestic reform and to gain access to export markets for India's goods and services. Mattoo and Subramanian argue that India should engage more actively in the multilateral trading system for four reasons: First, such engagement could facilitate domestic reform and improve access to export markets. If the government could show that domestic reform would pay off with increased access to markets abroad, those who gain from such access - whether they export textiles, software, professional services, or other products - could represent a countervailing voice to reform's opponents. In turn, the need for this external payoff to secure domestic reform makes India a credible bargainer, which could induce trading partners to open their markets to India.Second, external commitments can foster good domestic policies, by providing guarantees against the reversal of current policies or lending credibility to promises of future reform. Such precommitments could help strike a balance between the reluctance to unleash competition immediately and the desire not to be held perpetual hostage to vested interests or weak domestic industries.Third, engagement can help enforce India's market access rights. If other countries do not eliminate quotas on textiles and clothing as scheduled, India can credibly threaten to withdraw its obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs).Fourth, multilateral tariff reduction could reduce the disadvantage (to India) of not being part of regional agreements. The value of multilateral engagement might be limited if the prospects for securing increased market access are dim, as the failed Seattle negotiations might appear to suggest. India must credibly test negotiating pessimism by showing its willingness to open its markets in return for improved access to foreign markets. Success is not certain, but India's chances are improved if it aligns itself with countries pressing for sound policies of open trade.This paper - a product of Trade, Development Research Group - was presented at the World Bank-National Council for Applied Economic Research (NCAER) Workshop on South Asia and the World Trade Organization in New Delhi on December 20-21, 1999