Trade Impasse at WTO - Essay Example

This impasse represented a marked shift in the global trade scenario in the sense that it not only impinged upon the world community to reconsider the cherished concepts like free trade and protectionism, but also extended a unique perspective pertaining to these concepts, harbored exclusively by the developing nations. This dilemma was further accentuated by the fact that while India and China managed to forge a unique alliance in the name of food security, the developed world stood divided against itself, with the European and American negotiators resorting to obstinacy and mutual recriminations (Bradsher 1).

The thing to be kept in mind is that Economics is an applied discipline and free trade and protection are merely the tools exploited by the individual nations in particular and the world community in general to solicit their respective objectives. A thorough economic analysis of this situation definitely needs to take into cognizance the political compulsions of the respective states. In the given scenario, China has to defend its primarily rural agrarian sector, its industrial growth being exclusively an urban phenomenon.

The US on the other side is averse to enervating its influential farm lobby in the election year (Bradsher 1). The Manmohan Singh led coalition government in India is running its last lap with immanent elections gaping ahead and does not afford to disturb its vote rich farming sector. Hence a credible way out calls for a win win compromise, which is based on sound economic principles and the pressing needs of the nations involved. The economic indicators that deserve immediate attention are that both the India and China are at present the victims of inflationary trends, with the inflation in India crossing the double digit mark in the last quarter of 2008.

China and India are resorting to protection going by the logic that this will encourage their farming sector, without considerably raising the prices of the agricultural products in their domestic markets. By doing so, they have failed to understand the intricacies of their respective economies that are now irretrievably bound to the global economy. The fact is that an imposition of high tariffs on the American agricultural products is eventually bound to increase the prices of the farm produce in both India and China.

Such improvised prohibition on the entrance of the foreign agricultural products in the domestic markets of India and China will certainly increase the prices of the similar commodities in these countries. Especially in India, where the farmers do not enjoy a direct and unobstructed access to the markets and the trade in the agricultural commodities is mainly governed by the commission agents. Once these vested interests come to know that the domestic markets are exclusively left at their mercy, they will certainly not hesitate in artificially elevating the prices of the farm produce by resorting to hoarding and black marketing.

The farming sector in China and India is not so resilient at present that an exorbitant tariff on the American agricultural products would directly translate into an enhanced internal competition, resulting in the lowering of domestic prices. One peculiar thing about the food products is that there exists a thin line between the finished product and the raw