WTO blues
Let the PPP be the focus
An exchange rate mechanism shaped on the principles of purchasing power parity (PPP) is the only way to pull out the Doha round of trade talks from ICU. Unless such a radical step is in place the cause of freer world trade is lost for a long time to come.
No sign of an accord. Not because there is no will. Politico - economic compulsions are one up. Started amidst high hopes in 2001 the talks are now at a dead-end, appeals and prayers notwithstanding. Conference halls reverberate with restated views.
In fact there is no meeting point before the sparring groups. A vicious triangle has emerged. In Washington farm subsidies are untouchable. Bush or Bill, US administration will not annoy the vote banks. With elections to be fought and legislature seats won at home, the welfare of distant folks can't elicit sympathy.
The European Union is in toe. The spectre of common agriculture policy still haunts European governments. Now the Doha round calls for lower tariffs on industrial goods. The public opinion is hostile to such concessions. No elbowroom for the governments being wedged between welfare-state commitments and rising jobless figures. The promotion of multilateral trade under ITO rules must therefore wait in the queue for attention.
The developing nations, led by India and Brazil, are on idle gear. Their promise to open up the market is conditional. Let others unlock their gates first. Convincing arguments all. The big question, however, is one of vaulting the non-economic barriers elsewhere. Yet another question is how equipped they are to compete in the new global markets. Skilled manpower is enormous. But where is the capital and machinery? Any guarantee that farm products and other low-ticket exports will fetch the rocket fuel for higher growth?
That being the case, a totally fresh approach is well in order to take the trade talks forward. A recalibration of the exchange rates would help. At the moment there is free trade only in name. Vitiating the game are a welter of exchange rates, fixed only God knows how. The exchange rates played a key role in promoting trade of individual nations. Industrial prowess and business acumen were secondary. Market forces were kept at bay. Time to save trade from such
manipulated exchange rates.
Parameters, set by purchasing power parity, could form the basis for a rational exchange policy for every nation. The transition however, to a PPP system will not be painless. It would need sacrifices by all. The rupee, for example, will appreciate to 7 or even 5 for the dollar. Yuan will be marked up by 40% to 5. And Yen too to 85 or 70. But the price is worth paying. For the resultant growth in commerce will be real and sustainable.
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