On rising trade protectionism, he said India needs to be nimble, flexible and explore multiple opportunities, and that there is nothing called a trustworthy partner in international politics.
“India is on the right track, and I think this is the Indian century,” he told ET during his recent trip to India, adding that thanks to Prime Minister Narendra Modi, the country has taken off on the economic front.
“India is a big player politically and economically,” and the world has to take it seriously, he said. “We now have an opportunity to ensure our views have an impact…In the old days India was left out.”
However, he cautioned that no one should take India’s rise as a given. “…when it looks to us like the Indian century, we should not become too complacent, because in economics, things turn around very rapidly.”
Bhagwati, known for his contribution to trade theory, has been a vocal proponent of free trade and economic globalisation.Asked if his ‘Spaghetti Bowl’ theory, amid the rising protectionism due to geopolitical concerns, still holds, he said: “I was basically worried about multiple trade agreements undermining the World Trade Organization, which is a multilateral institution.”Bhagwati coined the term spaghetti effect in a 1995 paper to describe the complexity of free-trade agreements and their negative impact on trade relations.
“It’s not as bad as people make out in the newspapers and in politics. But it is definitely a situation where many markets are not as robust as they used to be. So, you have to worry about the alternative,” he said, calling for a need to think about that direction.
“Like what do we do if we are dependent on the United States and the US acts protectionist? Those kinds of questions are arising now. So, we have to think through what is it that we want,” he said.
“If countries are resorting to protectionism-many of your trading partners-you have to take that into account but in a way that opens up more possibilities,” he said. “So don’t trust one partner but trust a group of partners and keep your eyes and ears open because if they are succumbing to their own political concerns and actually shutting off markets,” he suggested. “There’s nothing like a long run, trustworthy partner and you having flexibility in your system is really the ultimate guarantee.”
Bhagwati said the inclusion of labour standards and environment into trade agreements is not a good idea.
On discussions around trusted supply chains, he said the way forward is to have multiple options. “You have to have the possibility of substitution, supplemental approaches and so on. Because you can’t rely on anybody.”
“…If you are worried about security, using multiple instruments, multiple sources, is the way to go,” Bhagwati added.