THE GIST of Editorial for UPSC Exams : 30 January 2020 (How to protect trade in a tug of war between nations (Mint))

How to protect trade in a tug of war between nations (Mint)

Mains Paper 3: Economy
Prelims level: Trade war
Mains level : Effects from liberalisation of growth and issues arising from it

Context:

• Developing countries have argued for decades that the rules governing international trade are profoundly unfair.
• But why are similar complaints now emanating from the developed countries that established most of those rules.

Reasons behind such complaining:

• A simple but inadequate explanation is “competition."
• In the 1960s and 1970s, industrialized countries focused on opening foreign markets for their goods and set the rules accordingly.
• Since then, the tide has turned.
• One reason why emerging-market producers are competitive is because they pay workers less.
• To replace lost manufacturing jobs, developed economies have been creating jobs in services.

Key challenges:

• Unfortunately, not everyone in developed countries has been able to move to good service jobs.
• The best are largely in big cities, where well-educated professionals have been able to cater to global markets, while small towns in.
• Two factors have increased the uneasiness over international trade and investment arrangements.
• Ordinary people in left-behind communities in developed countries are no longer willing to accept existing arrangements.
• At the same time, emerging-economy elites want a share of the global market for services, and are no longer willing to cede ground there.\
• Trade negotiations have become exercises in power politics, not persuasion: threats of sky-high tariffs to close off markets.
• One important difference is that the public in emerging markets is more democratically engaged than in the past.
• Therefore, any success that rich countries have in setting onerous rules for others today could prove pyrrhic.

Way forward:

• It should developed countries respond to domestic pressures to make trade fairer.
• For starters, it is reasonable to demand that developing countries lower tariffs steadily to an internationally acceptable norm.
• Discriminatory non-tariff barriers or subsidies that favour their producers excessively should be challenged at the World Trade Organization.
• But to go much beyond these measures to attempt to impose one’s preferences on unions, regulation of online platforms, and duration of patents on other countries—will further undermine the consensus for trade.
• Less intrusive trade agreements today may do more for trade tomorrow.

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Prelims Questions:

Q.1) With reference to the Bharat Parv, consider the following statements:
1. It is being celebrated as part of Republic Day celebrations since 2016.
2. It is organized by the Union Ministry of Culture.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: A
Mains Questions:
Q.1) What are the major challenges for developed countries in international trade markets?