Although I appreciate niaz's view on MFN status to India and his concerns on interpretation, I don't agree with his points on free trade. Free trade will improve efficiency. But at what cost? Sometimes they wipe off local industry causing more serious problems like unemployment, poverty and lower standard of living. Ask Detroit, Pakistani sports goods manufacturers(probably the effect of China is not yet completely felt), American service industry(now even in finance, most people are Asian or Indian), and so many Euro countries which lost their manufacturing industry to Germany.
If you see the world as a black box producing some output, then yes, you get efficiency. If you are willing to let people die in the natural selection process, then all is well. But then they are people.
---------- Post added at 12:00 PM ---------- Previous post was at 11:57 AM ----------
I would like a clarification on this. Free trade never hurt any country?!!
Visionary economists such as Adam Smith had advocated Free Trade among nations as early as the late 18th century. Why should a consumer pay to keep an inefficient production line afloat and its owner rolling in money?
In the 19th century many were against Industrialization because it created unemployment temporarily. There was a community of Luddites who were going round the English countryside breaking up machinery to stop Industrialization. Would you agree with their view? Has not industrialization created far more jobs that were lost?
Every action you take will have ‘Pro’ as well as ‘Con’ consequences? Every country has her niche where a certain kind of goods can be produced cheaper than at another place. With free trade you give the consumer an opportunity to buy cheapest and best quality goods. Local inefficient factories will close and instead switch over to those goods /products that they can producer better and cheaper than the imported ones. It would mean improvement in quality of skilled labour and better quality education to produce more competent management. Not allowing free trade has its ‘Pro’ & ‘Cons’ too. In my view free trade has more advantages.
I am convinced that Indian economic boom of today is largely due to the open door policies of Narisimha Rao of 20 years ago when Man Mohan Singh was the Finance Minister. Just look at the job creation in India from 1947 to 1990 and 1991 to now. All the Free Trade Blocs such EU, ASEAN, NAFTA, MERCOSUR etc. have proven beyond doubt that reducing/removing tariff barriers result in great economic benefits. Naturally there would be some sections of the economy where there would be short term closures but should we sacrifice larger national benefit to save inefficient practices? Won't the nation suffer more in the long term if the barriers were kept on?
Chinese imports have been blamed for adverse effect on some sections of the economy in many countries especially in the USA. Don’t you think the only reason for Chinese success is production cheap durable goods? I can understand that USA where labour is far more expensive, Chinese producers have an unfair advantage, but how so in India? Don’t you think it is shameful for an Indian factory to be unable to compete with the Chinese and such factory deserves to be closed?
But all is not lost, cheap Chinese exports created an affluent Chinese middle class. This is proven by the fact that in the early 80’s there were hardly any cars in China and bicycle was the main means of transport. 20 years later China became the world’s largest automobile market surpassing even the United States (13.9-million vehicles sold in China in 2009 versus 10.3-million in USA). So the countries producing cars benefited greatly this includes USA as well.
It is a pity that Pakistan and India have not gained a lot from the SAARC agreement. I maintain my view that both Pakistan and Indian will benefit from free trade as long as it is done on an even and just basis. There would always be sceptics as you can never please all the people all the time. Let us agree to disagree.
