IN its desperation to defend the utterly indefensible Indo-US Trade Deal, the Modi government has been using one absurd argument after another. One such argument it has trotted out is that opening the Indian market to duty-free imports of commodities like red sorghum, soya bean and Dried Distiller’s Grains (DDGs) from the U.S., which the Kisan organizations have been opposing, would actually lower the costs of animal feeds and therefore help the farmers; this argument in other words defends the Trade Deal on the grounds that it would lower domestic prices in India of a range of inputs used by farmers.

This argument is absurd since all tariffs are imposed because domestic goods are more costly to produce than their imported counterparts. If the import of goods was to be allowed on the grounds that they are beneficial by virtue of being cheaper, then the country should have no tariffs at all. In fact, tariffs are imposed for two totally different reasons: first, they encourage domestic production of the goods that would have otherwise been imported, and hence increase domestic employment directly and indirectly. The domestic production of animal feed for instance not only generates employment directly in the sectors producing it, but, additionally, by putting incomes in the hands of the domestic producers of such products, generate demand for a range of other goods which create secondary and tertiary employment in other sectors. Importing the goods entails that these income and employment generating effects “leak out” abroad. Secondly, importing requires foreign exchange, of which there is obviously a shortage; domestic production of imported goods therefore has the beneficial effect of conserving scarce foreign exchange.

But then, it may be asked, how can the country forego the benefits of having cheap imports, especially of inputs, that could keep the final goods prices low and make the country competitive in the world market and hence able to export more. For cheapening input costs and hence final goods prices, however, it is not necessary to undertake actual cheaper imports of such inputs. In fact if it is considered necessary to keep certain input prices low, then the government can always give a fiscal subsidy to achieve this objective, while encouraging domestic production of the good in question, and saving on foreign exchange and hence keeping down foreign indebtedness.

This is actually what the U.S. government has been doing for a long time with regard to its agriculture sector as a whole. The magnitude of subsidy is so large that in some years it equals almost half of the total value of agricultural production. Since the number of persons depending on agriculture is small in the US, this subsidy can be given, and is given, in the form of direct income support; and the US, while being vociferously critical of subsidies given by other countries like India, at international fora, has carefully and tendentiously, kept the subsidies given by itself to its farmers out of the ambit of forbidden subsidies on the entirely spurious argument that they are not “market distorting”. Exactly the same incidentally holds for the European Union which also gives huge subsidies to its farmers, but argues spuriously that unlike government subsidies given to farmers in the third world, its subsidies are not “market distorting” and hence should be allowed without any constraints.

Take the case of cotton, which is one of the goods whose imports are a threat to Indian farmers; in fact the raw cotton market in India has already got into a depression in anticipation of the troubles that lie ahead. In the case of cotton the US subsidy to farmers some years ago was as high as $ 127 thousand per farmer; Brazil complained against this and the subsidy had to be brought down. The subsidy per farmer even now however is still as high as Rs.1 crore per farmer (when converted to rupees at the current exchange rate); since there are less than 27,000 cotton farmers in the US, giving such astronomically high subsidies is administratively quite manageable for the US government.

The basic point therefore is that the “cheap import argument” is an entirely bogus one: if it is accepted then not only would incomes and employment shrink greatly in the country, but even food security would be undermined as subsidy-backed EU and US grains would flood the Indian market to the detriment of millions of India’s own grain-growing farmers.

Likewise the government’s defence of the Indo-US trade deal on the grounds that it opens up the $30 trillion American market for Indian goods, is ludicrous in the extreme. This figure refers to the magnitude of US GDP and hence approximately to the total turnover of goods and services; obviously, India, even if it could become a highly successful exporter, could capture only a fraction of this market. The talk about access to a market of so-many-trillions therefore is sheer bombast; if this argument is taken seriously then a trade deal with any big economy, no matter how unfavourable for India, could be justified on its basis.

More recently the government has resorted to the ploy of dividing the farmers opposed to this deal on the basis of their particular interests. For instance, the Western UP farmers were told not to object to the deal since it did not touch wheat or rice or any of the major crops grown by them. They should according to the government object to the deal only if it affected them, and not otherwise; the fact that fruit growers in Jammu and Kashmir or Himachal Pradesh, or cotton growers in Maharashtra, would be adversely affected by it should be of no concern to them. This is not just a blatant attempt to disrupt farmer solidarity, but an attempt to reduce farmers into mere self-interested objects rather than concerned citizens, as they should be in a democracy. It is an affront to their citizenship and a blow against democracy, where everybody must be interested in the well-being of everybody else, and must resist anything that affects the well-being of others even if it does not hurt oneself.

None of these ridiculous arguments can detract from the fact that the Indo-US trade deal is an “unequal treaty” imposed on the Indian people by the Trump administration with the connivance of the Indian government that wishes to curry favour with Trump. But now that the US Supreme Court has ruled that Trump’s tariff aggression was unconstitutional, that it was not within his competence to impose tariffs at will, and that in doing so he was appropriating the powers of the US Congress, the basic context within which the Indian government buckled down has been removed. An opportunity has been gifted to the Indian government to walk out of this “unequal treaty”; the people of this country would not forgive it if it does not do so even now.

There is in addition a deeper point here relating to development strategy. Even if the Indo-US deal had not been an unequal treaty, the basic perception behind it would still be wrong. This perception upholds the benefits of “export-led growth”, which also underlies the spate of free trade agreements, with the EU, UK, UAE and others, that the Indian government has been signing of late. The theory behind “export-led growth” does not reckon with the fact that the growth of aggregate demand in the world market is given by exogenous factors, so that one country’s success at achieving a high rate of export growth is necessarily at the expense of another.

The “export-led growth” strategy thus not only pits one country of the global south against another, but has two other drawbacks: first, it is anti-democratic in so far as, for promoting exports, MNCs have to be given a red-carpet welcome, which diminishes the jurisdiction of the democratically-elected government and introduces what in colonial times was recognized as “extra-territoriality”; and second, it fragments the economy, so that even when some sectors that succeed in the export drive do well, others that are at the receiving end of foreign competition, fall behind and languish.

A democratic and balanced development strategy that is also non-invidious towards other countries of the global south, is one where “exports” from industry are directed not towards other countries but towards the domestic agricultural sector. This is also more egalitarian for it pins the growth of the entire economy on the growth of peasant agriculture. This is the strategy that India had followed after independence; the argument against it, namely that it did not usher in a high enough GDP growth, needed to be countered by a higher rate of growth of peasant agriculture through land reforms and other measures, rather than by abandoning it altogether as the introduction of neo-liberalism did. The sooner this is realized by the country, the better.