The government deserves congratulations for its firm stand at the WTO, which finds support in Rodrik’s trilemma

The Princeton don Dani Rodrik is one of the world’s leading economists. He is a firm believer in and supporter of globalisation. However, he has also posed a famous “globalisation trilemma.” A trilemma describes a situation where only two of three things can hold true at the same time. If any two out of three conditions prevail, the third cannot. Thus, according to Rodrik, “economic globalisation, political democracy, and national determination are mutually irreconcilable. We can have at most two at one time. Democracy is compatible with national sovereignty only if we restrict globalisation. If we push for globalisation while retaining the nation state, we must jettison democracy. And if we want democracy along with globalisation, we must shove the nation state aside and strive for greater international governance.”

As Rodrik argues, if we want to deepen both economic globalisation and political democracy, we would require global institutions that are truly democratic, which respond to legitimate demands, the very basic needs of world citizens — that is governance at a global level. Since such a global political community is as yet a distant, quite unrealisable dream, we have to accept the sovereignty of nation states responding to the demands of their citizens. That is if we respect the democratic ideal.

What the government has shown is that it is unwilling to sacrifice the basic requirements for food security of the Indian people at the altar of what Rodrik terms “hyperglobalisation.” The needs and rights of the Indian people must always come first for a democratically elected regime and the Modi government is to be congratulated for affirming its commitment in this regard, despite the humongous pressure it was placed under, both by lobbies within India and powers abroad. Sacrificing the national agenda of food security for the sake of an even deeper globalisation is not an option for a sovereign government of India.

But Rodrik actually demonstrates something even more important. He suggests that re-empowering national democracies places the world economy on a stronger footing. Developing strong markets and open economies requires more government, not less. He says, “Markets need to be embedded in institutions of collective deliberation and social choice. Weakening democracy in the quest for deeper globalisation is one of the worst bargains we could strike.” Building on the work of David Cameron (the Yale political scientist, not to be confused with the British Prime Minister), Rodrik shows that contrary to popular expectation, governments have grown the largest in those economies that are the most exposed to international markets. And after testing out a number of possible alternative explanations for this counter-intuitive result, Rodrik finally concludes that this is because in highly globalised nations, citizens demand that their governments compensate them against the risk that international economic forces expose them to.

I would suggest that there is no better way to understand India’s position at the WTO negotiations. Let us first highlight two outstanding facts about the situation regarding food subsidies and the WTO. One, that the U.S. and the European Union currently provide four to ten times the agricultural subsidy per person compared to that provided by India. And two, that India faces a real crisis of hunger and malnutrition among a very large number of its people. In such a situation, it is only natural that a sovereign democratically elected government will seek to protect the interests of its citizens, rather than be subject to palpably unfair trade agreements.

Let me explain why I call the agreements unfair. There are two decisions that have proved contentious here: the Ministerial Decision for an agreement on trade facilitation (TFA) and the Ministerial Decision on public stockholding for food security purposes. India has refused to sign the TFA in the absence of a “permanent solution” on subsidies on account of public stockholding for food security purposes. This is at the heart of India’s entire architecture of food security built up over the last four decades, which includes the system of procurement from and assurance of minimum support prices (MSP) to its farmers and the public distribution system (PDS), culminating in the recently passed Food Security Act.

The present WTO ceiling on domestic support is pegged at a mere 10 per cent of the value of production, which is itself calculated at fixed reference prices of the 1986-88 period. This is ridiculously low, and unrealistic and unfair, not just to India but to many other nations with a large farm sector. It may be useful here to remember that despite all the efforts to move people to urban areas and away from agriculture, the latest United Nations population estimates show that even in the year 2050, around 800 million Indians will continue to live in rural areas. No democratically elected and accountable government of India can afford to ignore the interests of these people, especially given the vulnerability of farming, deeply aggravated by the newly emerging context of climate change. More than 80 per cent of India’s cultivators are small and marginal farmers, who grow crops on less than 5 acres of land. They face increasing challenges of water and livelihood security and need continued government support to enable them to earn a sustainable income. This support that we need to provide our farmers cannot be given within the limits set by the WTO agreements.

Paragraph 47 of the Doha Ministerial Declaration is abundantly clear on a “single undertaking,” which means that all agreements come into force — together as a package. Thus, India is absolutely right in insisting that the TFA can be agreed to — if and only if there is an agreement on subsidies on account of public stockholding for food security purposes. Apart from the massive support the government has received from farmers’ organisations and civil society groups within India, it has also secured the support of countries such as South Africa, Bolivia, Cuba, Venezuela and the tacit support of the G-33, except Pakistan.

What is much more surprising is the kind of media furore that the Indian government’s position has evoked. This can only be seen as a reflection of the way in which the discourse on “free market fundamentalism” has acquired a dominant position over the last 20 years. A deeper reflection on Rodrik’s trilemma would hopefully disabuse many people, who assume that any and all steps towards the free market are an unmixed blessing in themselves, forgetting that robust structures of governance are essential to the functioning and legitimacy of the market mechanism in all capitalist democracies, including the most advanced among them.

It is to be very much hoped that Prime Minister Modi will continue to stand firm on India’s position, even during and after his forthcoming visit to the U.S.

(Mihir Shah is former member, Planning Commission, Government of India.)