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Forget small retailers, can our govt stand up to Walmart?

September 24, 2012 13:34 IST

As multilateral negotiations have paused, multi-national corporates have increasingly become aggressive; and our bureaucrats restless, writes M R Venkatesh.


"There is strong evidence that rural communities in the United States have been more adversely impacted by the discount mass merchandisers (sometimes referred to as the Wal-Mart phenomenon) than by any other factors in recent times." No. That is not Mamata Banerjee commenting on the debilitating impact of FDI in retail.

Rather it is a study on the "Wal-Mart Phenomenon on rural communities" conducted by Professor Kenneth E Stone of the Iowa State University. His study demonstrates that some small towns lose up to 47 percent of their retail trade after 10 years of entry by Wal-Mart stores. Yet several economists want us to believe that small retailers can well co-exist with the large multi-national ones in India. How strange!

This study adds "Shopping malls fundamentally changed the way Americans shopped. They drew shoppers from the downtown to the shopping center location, typically at the edge of town or in a suburb. Shopping centers caused the demise of downtown, most of which have never fully recovered." If this study is to be believed large retailers not only change shopping patterns, but have also re-arranged cities.

Interestingly, this study was conducted way back in 1997. Yet why do I quote this study at this distant point in time conducted in a distant land? The fact remains I have no choice. I have not come across any study, much less, on FDI in retail by any University in India. And that is my grouse with academicians in India - completely disconnected from reality.

But this piece is not about academicians in India. Rather one needs to be concerned about how large retail stores world-over have disrupted local communities, destroyed small retailers and in the process successfully managed governments across continents.  Can India be an exception to all this?

It can never be. You know it. I know. Everyone knows that the "forces of globalization" are omnipotent and omnipresent. Their power to "manage" governments across continents is legendary. Yet we rationalise such decisions as one taken with complete "national interests" and without "external interference." How stupid can we ever get?

India is well and truly for sale

Believe me, all this is not solely the handiwork of our political parties. Our bureaucrats in Finance Ministry have a solitary objective - a posting in IMF or World Bank. Those in Commerce Ministry may eye one in Geneva, where WTO is headquartered. Those in External Affairs may seek one in United Nations.

It is indeed a remarkable coincidence that children of senior bureaucrats, however dumb they may be, often seem to get plum postings in such institutions. And for every such possible posting a favorable note gets prepared back home. If such a list of politicians, bureaucrats, army officials, Judges, senior editors and intellectuals are prepared, I am sure this will stun the nation.

India signed the WTO Agreement in 1994. We were promised milk and honey then exactly as we are promised now under the FDI policy on retail. But curiously India signed the WTO Agreement without even debating the consequences in the Parliament, media or academia. Surely such secrecy has some quid pro quo - a foreign posting for one, a foreign jaunt for another and a study tour for the third. This is all that is required to buy India!

Remember Syed Gulam Nabhi Fai and his operational strategies. Well that was for marketing Pakistani policy on Kashmir. This one is for trade. Either way India is for sale. 

The manner in which India conducted the negotiations during the run up to the WTO Agreement was brilliantly captured by Chitra Subramaniam in her explosive book - India is for Sale [UBS Publishers' Distributors Ltd, 1997]. Quoting a senior European negotiator at the WTO, she tells us: "It Looks like Mother Teresa has drafted India's trade script - it says give, give, give till it hurts."

Importantly, even after two decades one is not clear as to why India suddenly acceded to the Agreement on Agriculture (AoA) to even become a part of the overall WTO agenda. It is rumored to this date that an oral communication from a lowly ranked official in the PMO to the negotiating team in Geneva in the eighties caused this tectonic shift much to the chagrin of developing world.

In effect, India abdicated her responsibilities as a leader of the developing world. Since then not many trust us. For if India had objected to Agriculture being subjected to a trade pact, under the then prevailing rules, it would not have been part of any further negotiations. Who and why in PMO allowed India to bring the vexatious subject of Agriculture to the negotiating table remains a mystery to this date.

A plain reading of the AoA (as were most other Agreements) is enough to tell us that its implications were devastating. Yet, the government of India went on to "sell" the Agreement after it was signed to Indians. "We have an offensive position on Agriculture" we announced to the world implying that we can sell our farm products – Basmati rice, Punjab wheat and Andhra mangoes to the developed world. All this in a country that is even to this day food-deficient.

Subsequently, thanks to several well-meaning individuals and NGOs we studied the AoA (for that matter the WTO Agreements) in greater detail. We understood the West heavily subsidizes its farmers. Consequently, we learnt our export to these countries can never be competitive. Moreover, the Agreement on Sanitary and Phyto-Sanitary measures (read hygiene standards) effectively prevents our farm exports as we can never meet such stipulations imposed by Western nations.

More importantly, we cognized that we run the risk of allowing subsidized farm imports from these countries into India, several years after signing AoA. Accordingly, by 2001 (When Doha round Negotiations began) we realized that we can at-best have a "defensive position" and not an "offensive position" on Agriculture. The hunter by then had become well and truly the hunted.

The AoA was an unmitigated disaster. We have probably postponed the inevitable thanks to the ganging up of several developing countries and internal contradictions of the developed ones. That explains why the logjam continues within WTO to this date. 

This sale is for free

History of WTO is all about countries like Benin, Chad, Mali or Burkina Faso – all with probably a combined GDP much lesser than Dadar in Mumbai - having individually demonstrated greater spine than India. In effect, it is these sub-Saharan countries, and not India, despite her economic, political and diplomatic clout that have taken over the leadership of the WTO.

Left to itself India probably might have compromised on Agriculture, opened up her retail and contrived, conjured and calculated to play Mother Teresa all over once again. Unfortunately, in a multilateral environment with several countries having enlightened national interest, this is becoming increasingly difficult if not impossible.

Significantly, under the WTO rules we could have bargained for something in turn – say higher visa quota for our software engineers or doctors into the developed world. However, a liberal visa regime in the West interests us. Not Benin or Chad. In a way structurally WTO has run into rough weather. So this trade off at a multilateral level is becoming extremely difficult.

Yet all these suggest why a multilateral negotiation - not unilateral - is the best bet for a country like India that has rarely demonstrated national spine. Ideally, for a few crumbs India would have further opened her markets and we would all have patted our back. But for reasons explained above we could not.

As multilateral negotiations have paused, multi-national corporates have increasingly become aggressive; and our bureaucrats restless. Can they postpone foreign jaunts simply because multilateral negotiations are complex? Can a plum posting for the daughter of a Minister be delayed because multilateral negotiations do not suit most world over? Can think tanks in India exist without the usual quota of foreign aid?

Hence we decided that this time it will be unilateral - one that will shame Mother Teresa in charity. Crucially what have we gained by opening up our $500 billion retail market? Nothing. We have not even bargained for a few visas as is our wont. Incidentally this charity goes up by the strange appellation of "Reforms" in India. That also explains why when it comes to this round of "Reforms," the usual suspects are celebrating.

In the process let us not forget that Indian establishment with all her collective strength is no match for the guile and gumption of Wal-Mart - one of the biggest beneficiaries of this "Reforms." Crucially, in such situations whenever it involves foreign powers, Government of India is programmed to come second best in such situations.

Remember Wal-Mart has a budget for lobbying and is alleged to have bribed its entry in several countries. Did they adopt the same methods to enter India? Quixotic one might argue. Baseless some might say. Possible. But to all those who ask this question first answer this - when has India in the past two decades (barring Phokran) stood up for her supreme self-interest?


The author is Chennai-based Chartered Accountant. Comments can be sent to mrv@mrv.net.in.
M R Venkatesh