Noted economist Jagdish Bhagwati on Wednesday took a dig at Noble laureate Joseph Stiglitz for his anti-trade liberalisation stand.
Delivering a lecture on "Trade policy choices before India : Doha et al" here today, Bhagwati said, "I often tell Stiglitz that you can use the Nobel Prize as a weapon of mass destruction."
There was plenty of evidence to show that trade liberalisation and foreign direct investment were beneficial.
However, trade liberalisation was part of a package of good policies required to ensure that the country did well, Bhagwati said, adding "the problem with developing countries is when a guy with a Nobel Prize arrives, people think they don't have to challenge them. Whatever they say can be treated as God's own truth,"
For India, he favoured going slow on the bilateral and regional free trade agreements, and a greater push for multilateralism. Unilateral liberalisation can be held back to offer something on a reciprocal basis at multilateral negotiations.
There had been a proliferation of bilaterals leading to a serious erosion of the Most Favoured Nation (MFN) principle, which said that each member country of the World Trade Organisation (WTO) should have access to the lowest trade barriers in other member-countries, Bhagwati said.
The US, Bhagwati said, "has converted bilaterals from trade to a non-trade game. It uses a divide and rule policy. Trade treaties are used to provide a country with market access to make it break ranks with others on non-trade issues (like intellectual property rights, labour and environmental standards) it seeks to include in the WTO."
Bilateral free trade agreements (FTA) work when a country has low tariffs. Say a country like Singapore has much to gain by going in for a FTA.
For India, however, "it is a dangerous game to play because it has high external tariffs and the cost, in terms of trade diversion will be high. Under a FTA, you end up diverting trade to a partner country, even if it is inefficient," he said.
