The Hindu Business Line : WTO has not helped the common man

THE results of the Hong Kong WTO Ministerial have been lauded not only by the Commerce Minister, Mr Kamal Nath, but also by industrialists. Dr Amit Mitra, Secretary-General, FICCI, feels that the lowering of peak import duties on specific products is likely to benefit the country. The developed countries are now imposing import duties of 30 per cent on readymade garments and 20 per cent on leather bags, which are expected to be brought down on the conclusion of the Doha Round.

But the benefits of the WTO do not seem to percolate down to the common man. Farmers continue to commit suicide. Naxalite activities are increasing due to increasing unemployment among the youth.

While, on the one hand, the businessmen are happy and excited, on the other, the common man is restive. The impact of WTO must be assessed keeping both aspects in mind. A study of nine large developing countries, with population of more than 100 million, and eight large developed countries, with a population of more than 30 million, was undertaken.

According to World Development Indicators 2005, published by the World Bank, the nine large developing countries had an average growth rate of 4.4 per cent in 1980-90, which remained unchanged at 4.4 in 1990-2003.

The WTO was formed in 1995; hence the latter period does not exactly reflect the impact of WTO; it can at best be an approximation (considering that eight years — 1995-2003 — are included).

The rates of growth of the developing countries has remained unchanged, while that of the developed countries have declined; it was 3 per cent in 1980-90 for the eight large developed countries and fell to 2 per cent in 1990-2003.

The WTO has, thus, had a positive impact on the developing countries. Correspondingly, the share of developing countries in the world GDP has risen from 18.4 per cent in 1990 to 19.5 per cent in 2003.

But why are the farmers committing suicide and why are our youth disgruntled in such a favourable situation? It appears that the situation of the developing countries is improving but the rate of improvement is slow. The poor man is happy if he gets a mud house instead of the thatched hut, but he feels unhappy if his neighbour is living in a ten-storey building. The condition of the developing countries is similar. They are overawed by the continued dominance of the developed countries in the global economy.

The share of 15 per cent people of the developed countries in world GDP fell from 81.6 per cent in 1990 to 80.5 per cent in 2003. At such a slow rate of change, it will take about 700 years for 85 per cent people of the developing counties to secure a share of 85 per cent in world GDP.

The second problem is that employment is not increasing. The growth rate of nine big developing countries is stable at 4.4 per cent, but the rate of unemployment in these countries has risen from 5.6 per cent to 6.9 per cent. Higher income is accompanied by less employment. This indicates that the benefit of the high growth is accruing mostly to the upper sections within the developing counties, while the common man is losing his job. Similarly, the developing countries are not entirely happy. Dr Amit Mitra was happy with the reduction in import duty on readymade garments and leather bags benefiting the workers in these areas. Similar reductions in import duties on other goods such as basmati rice, diamonds, linen, and wooden furniture should have led to higher employment. But unemployment is on the rise. In other words, the reduction in import duties on many other items has not improved the conditions of our workers.

The developing countries are indeed benefiting from the WTO. But there are two problems. One, the rate of improvement is too slow. Two, the benefit is accruing only to the upper sections. We will have to find a way to both increase the growth rate and also provide relief to the common man. This can possibly be done if we do not open the domestic economy completely to global competition. Specific labour-intensive sectors can be protected from capital-intensive production, both from domestic players and multi-national corporations. Heavy taxes can be imposed on capital-intensive production in these select sectors. This will lead to generation of jobs, providing relief to the common man.

The rest of the economy can be opened to global competition that will result in a higher growth rate. The growth rate may be a trifle higher if we open all sectors to global competition, but the social consequences could be disastrous.

(The author is a New Delhi-based freelance writer. He can be contacted at bharatj@nda.vsnl.net.in)