Balance of power shifting with emergence of India, China
Emergence of Africa as a global player in food supply
India an essential partner in capacity building for outsourcing in Africa

“The balance of power is shifting with the emergence of China, India, Brazil, etc.” and “the reality of the economic benefits and sensitivities of free trade is now understood by all despite their negotiating stance at international trade forum”, says the Director-General of the Commonwealth Business Council, Dr. Mohan Kaul. In an interview with Amitabha Sen, Dr Kaul dealt with wide ranging issues including problems and prospects of Doha talks, potential of Africa’s emergence as a global player in meeting food requirement, India’s crucial role in capacity building for outsourcing in Africa. “I believe that the developed countries are fundamentally opposed to the safeguards trigger being proposed and if they condone this in any way it will weaken their negotiating position”, he observed. As a leading power in the South-East Asia region India sets the example for others, he said.

While bi-lateral agreement is valuable in the absence of progress on an overall WTO agreement, it would be better to accelerate the implementation of the regional agreement within SAARC that will stimulate intra regional trade.

Dr Kaul strongly belies that Africa could take a global lead in respect of food requirement but the lack of organization and scale in African food production, the poor infrastructure and poor border efficiency make exporting food economically almost impossible for this unexplored, unexploited potential of Africa.

About digital divide the CBC Director General said “India, through the CBC would be an essential partner in building capacity for outsourcing in Africa.” The CBC is already involved in an IT Park Project in Uganda, with the objective of making “Kampala the Bangalore of Africa”.

AS: After collapse of Doha talks last month you said the collapse “is a shame” You also said: “I believe that each Country represented at the (Doha) talks should demonstrate its commitment to Free Trade, by unilaterally putting in place what they would have accepted in Geneva. If India and China, for example, were to open their agricultural industries, even with the contentious ‘safeguard trigger’ in place, trade would still increase and all would benefit.” You posted in your blog on August 8, 2008 close on the heels of your reply to a BBC correspondent on the eve of last Doha round that “it is the last chance” to settle the issue.

“We would like India to be more pro-international trade rather than react. We are expecting a change in India’s strategy, tactics and rhetoric so that it will have a much better effect on how other developing countries will look at. That does not mean one should give up the negotiating power of getting the best out of the developed countries. It needs change in tactics, strategy and rhetoric and the way things are presented.” You expressed three years back in an exclusive interview with www.indiaonestop.com in early March 2005.

Do you find any qualitative change in the stand of both developing countries led by India, Brazil and others on the one hand and the US, EU countries on the other? Why this stubborn attitude? How to melt ice?

MK: The negotiations started when the economic climate in the world was very different. We now have a shortage of food and good nutrition in a large number of communities, we have the highest food prices ever experienced, we have the highest cost of energy and climate change is becoming a real challenge to economic development and social development. The negotiators, primarily the US and EU together with some of the stronger developing countries, are still working from their initial negotiating mandate which should be torn up so that they can negotiate recognizing reality. Why do US farmers require the highest subsidies ever when the price they are getting for their products have never been higher?

AS: You said even if India and China continue to grip on its “contentious safeguard trigger”, trade would “still increase and all would benefit all”. If that is the fact, what then, according to you, prevents developed nations to clear the standoff?

MK: I believe that the developed countries are fundamentally opposed to the safeguards trigger being proposed and if they condone this in any way it will weaken their negotiating position.

AS: Can CBC take a meaningful stand on this crucial issue even indirectly as it represents 53 countries spreading over five continents? Did CBC ever make any such initiative even in a suggestive manner to raise the issue with WTO?

MK: The CBC keeps in close contact with the key negotiators and the senior staff in the WTO Directorate to try to help progress. We have been instrumental in ensuring that trade facilitation is an issue that all countries now recognize is something that should be agreed and will assist all WTO Member countries.

The WTO negotiations are between countries and the CBC can only influence from the outside. Even within the Commonwealth there is a divergence of views relating to the way forward and this is an area that we are working to reduce the divergence.

We work closely with the business community. They are all concerned at the current failure and want to see a successful conclusion to the negotiations. Developed country business will survive and prosper despite the barriers. The barriers just inhibit the rate of economic development especially in the developing countries where it is consumers and the economy that suffer most from the barriers to trade. We are working with business to see how we might champion some of the potential areas of success identified in these negotiations. Trade facilitation is an area where unilateral implementation would give economic benefit to all.

AS: Like in your interview with IndiaOneStop.com, this time in your observation made to BBC again you stated that Africa could take a global lead in respect of food requirement. In fact this time you were more pointed to the issue when you said that as only 5 percent of its agriculture is commercial, Africa could be turned into a “Food Basket” for the entire globe provided necessary backup support- both technological and investment- is extended to this continent by the developed countries. Could you elaborate a little on this?

MK: African food production has been held back by the availability of low cost subsidized agricultural products from developed countries such as the US and the EU. Exports of agricultural products from Africa have been inhibited by exorbitant tariffs in developed countries. The lack of organization and scale in African food production, the poor infrastructure and poor border efficiency make exporting food economically almost impossible.

There is no doubt that the availability of subsidized food from the EU and the US has to be reduced so that the economics of local production become more beneficial; improve the ability and incentives for local production by improving the scale of production and investment in agriculture; bring agricultural production into the 21st century by improving irrigation, fertilizer use and scale of production.

Facilitate the trade of agricultural products and equipment across borders by introducing a step change in border efficiency.

The CBC is actively addressing these issues together with influential business partners. We are not only working on the policy front but also at a practical level with country initiatives.

AS: In your comments to BBC you mentioned about “changing balance of power” is reflected in the Doha talks. Would you like to mean that global balance of power is tilting more towards the conglomerate of developing nations and the rich developed countries should accept this reality and try to strike a reasonable balance? What would be your suggestions to both these two blocs?

MK: Yes, the balance of power is shifting with the emergence of China, India, Brazil, etc.

The reality of the economic benefits and sensitivities of free trade is now understood by all despite their negotiating stance. The pressures on the trading system being caused by huge increases in the cost of energy and the need to tackle climate change will help to reduce the blinkered nature of the negotiations and support the identification of the most commercially beneficial and environmental sustainable sources of production. Full recognition of the economic and environmental realities of international production and trade must start to play a far more significant role in the trade negations. It is no use trying to produce a quick fix without taking all of this into account because the result will not be sustainable.

As I have indicated earlier, we need countries to implement unilateral change that they are comfortable with and that will stimulate economic benefit and work towards a more environmentally sustainable outcome. It is also time for business to become more vocal and responsibly engaged in the way forward, especially in the area of food production and climate change.

AS: South Asia is emerging as a powerful bloc and SAARC is trying to emerge as a power to reckon with in future. “South Asia’s growth remains resilient amidst a mood of lowering expectations in almost all developed economies. This provides an opportunity for governments and business in the region to advance the agenda on intra-regional trade if a common commitment, focus and sense of urgency can be built on.” you said on the eve of SAARC summit in Sri Lanka early August this year Assuming you being at the helm of SAARC what would have been the roadmap?

MK: The CBC recently made the following recommendations for action by South Asian governments to address significant barriers and constraints impeding trade in the region:

AS: While talking about SAARC, role of India assumes great significance being the “big brother” in the region. Do you think that India has so far played its due role in strengthening intra-SAARC trade and business or India needs to significantly change its trade policy further to even more advantages towards SAARC member countries? But what it means to India? For example, India, As you are aware, had long back accorded MFN status to Pakistan but Pakistan is yet to reciprocate the gesture? How would like to explain this? Don’t you think expectations of more and more trade concessions from India should match logical reciprocity from other member countries such as Pakistan, Bangladesh and others?

MK: As a leading power in the region India sets the example for others. Taking unilateral action to reduce the cost of trade is a good way forward if this suits countries trade ambitions. This also sets an example for other countries. Whilst bi-lateral agreement is valuable in the absence of progress on an overall WTO agreement, it would be better to accelerate the implementation of the regional agreement within SAARC that will stimulate intra regional trade.

AS: Major SAARC nations being in the Commonwealth, can CBC be expected to play its role in strengthening the intra-regional trade and business or has CBC already taken initiatives toward that end?

MK: The CBC recently issued a report covering "Regional Trade in South Asia” recommending stronger co-operation within SAARC and for more regional trade development through the South Asia Free Trade Agreement.

We are working with major SAARC bodies in energy, capital markets and trade to bridge this perception-reality gap about the opportunities there.

The demographic dividend in South Asia remains compelling and underlines the region’s trade potential from both domestic and international commerce. In South Asia one fifth of the population is aged between 15 and 24 (the largest number of young people ever to transition into adulthood in the world). With reduced birth rates and consequent demographic changes, the dependency ratio by the year 2020 is projected to come down to about 49 in South Asia and to about 47 in India. Such a low dependency ratio would imply that the economically active population in the South Asia region will increase from about 800 million in 1999 to about 1.2 billion by 2020 and bring in its wake associated advantages of demographic transition. What this means is that over the next few decades, South Asia will have the world’s largest economically active population.

South Asia is also home to the largest concentration of a growing middle class in any three bordering countries (estimated at around 350 million) and by 2015 to five of the world’s ten largest cities.

AS: In the Commonwealth conglomerate, role of the UK admittedly assumes great significance. The recent CBC-UKTI Trade Investment report 2008 reflects one such initiative taken by the UK. The CBC-UKTI report however reveals that though the country (the UK) gains on investment but it drops on trade sharing with India. As CBC Director General what would be your suggestions to bridge this gap? It has surpassed the US in terms of investment in India. Can the UK outsmart the US in bilateral trade as well or raise it up further from the present relegated position?

MK: The UK is primarily a services economy. Trade with India could and will develop but an agreement with India related to the services sector, perhaps through the JETCO mechanism, would be the most powerful way of increasing trade between India and the UK.

AS: South Asia is the fastest growing region in the export of services. South Asia now needs to take advantage of its geographical proximity and strengthening relationships to build new partnerships in various sectors including the capital markets, banking, IT and telecommunications. CBC has already set up a separate entity known as CBC Technologies. What role you would be envisaging for India as a global software giant in CBC’s ICT plan? Do you have any specific plan for the SMEs in this sector?

MK: India, through the CBC would be an essential partner in building capacity for outsourcing in Africa. You may recall the CBC is involved in an IT Park Project in Uganda, with the objective of making “Kampala the Bangalore of Africa”.

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1.It has been estimated by the US Government (Strategic Studies Institute of the US Army War College, 2002) that with all the major countries in the South Asia pursuing reforms at the same pace, if not faster than India, an increasingly open and more integrated South Asian economy would be able to increase the region’s GDP from US$593 billion in 2002 to as much as US$4 trillion by 2020

Dr Mohan Kaul was appointed Director-General and Chief Executive Officer of the Commonwealth Business Council (CBC) on its establishment by the Commonwealth Heads of Government in Edinburgh in October 1997. Dr Kaul is currently a member of the Presidential Advisory Councils of Mozambique and Zambia. In the past he has served on similar councils in other countries. He was involved in establishing the G8 Business Action for Africa, Business Action for Asia, Business Action Against Corruption, Business Action for Corporate Governance, Commonwealth Project Finance, Micro-Financing, Investment Climate Facility in Africa, Africa Recruit, NEPAD Business Group, South Asia Trade and Investment Network, China-India-Brazil-Africa Business Forum, Commonwealth-Middle East Business Forum and the UK-India Business Leaders Forum.

He was involved in setting up the Commonwealth Association for Public Administration and Management (CAPAM) in Canada, Commonwealth Network of Information Technology for Development (COMNET-IT) in Malta and Commonwealth Local Government Forum (CLGF) in UK. He also led the Commonwealth Initiative on new Public Administration approved by the 1993 CHOGM in New Zealand.

He has a PhD in Management Science from the University of Paris-Sorbonne. He is author of a number of publications, including: An Outsider’s Inside View, 2000: From Problem to Solution: Commonwealth Strategies for Reform: Managing the Public Service, 1995, Management Reform in Government: A Review of International Practices and Strategies; co-author: Strengthening
Indigenous Communities: Development Initiators Programme, 1991, Searching for a Paddle: Trends in Information Technology Applications in Asian Government Systems, 1987.

September 16, 2008