India: Open for business or not?

The Trade Facilitation Agreement (TFA) inked in Bali, Indonesia, in December 2013 was supported by developing and developed countries alike as a way to reduce red tape, costs and time at the border, in ways that would promote economic growth through trade. According to the G20, "Full implementation of this agreement could potentially foster US $1 trillion in economic activity and create 21 million new jobs, 18 million of which will be in developing economies."

The Organisation for Economic Co-operation and Development (OECD) estimated that full implementation of the TFA would reduce trading costs by more than 14 percent for developing countries and by more than 15 percent for lower middle-income countries and create millions of new jobs.

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Indeed, the TFA was the only part of the long-stalled Doha Development Agenda negotiations that was so broadly supported that an agreement was able to be reached last year. As World Trade Organization members strived to meet the July 31 implementation deadline, the World Bank coordinated with international organizations and major economies to ensure that resources would be available for countries that needed assistance in implementing the agreement.

All was on track.

But then India and a few like-minded countries decided to renege on the original bargain and hold the pro-development, pro-growth TFA hostage to renegotiate other special benefits for themselves. These actions have put on hold-and perhaps destroyed-the most important pro-growth, pro-jobs trade agreement that has been negotiated globally in 20 years. As a result of India's actions, emerging economies, including India, will stand to lose millions in terms of lost jobs and lost commercial opportunities if the TFA cannot move forward.

India's actions raise serious questions not just about its commitment to pro-growth international engagement, but also whether it is truly prepared to advance domestically the same type of pro-growth reform agenda on which Prime Minister Narendra Modi campaigned. Cutting red tape and bureaucracy has been a centerpiece of the Modi domestic reform agenda, but India's actions last week create new skepticism about whether the Modi government is fully committed to the type of reforms that are critical for India's own growth and its international competitiveness.

As the Indian government moves to solidify its reform agenda at home and abroad, India has a choice. It can choose to truly be open for business and move toward pro-growth strategies that will unlock domestic growth and increase its attractiveness as a destination for new investment, or it can do more of the same and continue to fall behind. The world is watching.

Dempsey is the National Association of Manufacturers' Vice President of International Economic Affairs.

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