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Today’s important articles/news in various newspapers (28th July)

Dear aspirants, following are the links of various articles taken from various newspapers. Click the link to read further. To get notification, follow the blog. Thank you

1. Can the multilateral trading system be saved?

  • Bilateral trade deals cannot create an environment conducive to trade expansion in a world where much of trade consists of global value chains that stretch across several countries.
  • Trade restrictions will only lower incomes and demands elsewhere in the world, which, in turn, will lower the demand for high-tech exports from the US, and, to that extent, reduce some of the new employment being created in the US economy

Background:

  • Trump is not the first US president to doubt the effectiveness of the WTO in protecting US interests.
  • The US and other industrialized countries have long felt that with the changing contours of global trade and economic integration, the only way trade can be seen as fair is if it comes with deeper integration on issues such as consumer safety standards, labour standards, intellectual property standards, Developing countries have strongly opposed these “behind the borders” measures.

Highlights of the issues

  • If the US politics pushes the administration to act against the country’s own long-term interest, there is not much that the world can do.
  • US President Donald Trump has imposed unilateral tariff increases on some of the US’s major trading partners and there are threats of more increases to come.
  • Retaliatory tariffs have also been announced.
  • The US effectively used its leadership capacity to mobilize a group of “likeminded countries”, covering 60% or so of world trade, to subscribe to higher standards, presenting larger developing economies. They could apply to join the new grouping with the new rules, or stay outside with correspondingly less market access.

World Trade Organization (WTO) views:

  • “Whether or not you call it a trade war, certainly the first shots have been fired.” WTO said that this is the time for any one concerned about the world trading system to speak up.
  • Since the consensus rule on which the WTO works made it impossible for the industrialized countries to make progress in this area within the WTO, they turned to plurilateral arrangements, such as the Trans-Pacific Partnership (TPP) with East Asia and the Transatlantic Trade and Investment Partnership (TTIP) with Europe.
  • Multilateralism was replaced by plurilateralism, but with the WTO dispute settlement mechanism still available to settle disputes within the new arrangements.

Can bilateralism succeed?

  • The problem is that bilateral trade deals cannot create an environment conducive to trade expansion in a world where much of trade consists of global value chains that stretch across several countries.
  • Each export or import includes many components imported from elsewhere. For trade based on global value chains to flourish, what is needed is a common set of rules for all countries participating in the value chain.
  • This is best achieved by a multilateral agreement or, as a second best, a plurilateral agreement that is sufficiently inclusive.

Misconceptions among the industrialized countries

The protectionist sentiment in industrialized countries is driven by mistaken notions.

  1. That trade imbalances reflect unfair trade policies followed by others.
  • They are the consequence of excess aggregate demand, which spills over into the balance of payments, and the solution lies in macro economic policy, not trade policy.
  • There are unfair trade policies which need to be curbed, but mere existence of a trade deficit does not prove unfair trade policies.
  1. That unemployment in some sectors justifies protectionist actions.
  • In fact, much of the unemployment in individual sectors in the US is the result of structural and technological changes which have altered competitiveness, generating more employment in sectors where the US is highly competitive (e.g. the high-tech sectors) while reducing it in others where it is no longer competitive.
  • The loss of employment in individual sectors is a genuine problem, but the solution lies in migration, reskilling and regional restructuring, not restricting trade.
  • There is also a more general apprehension that new technologies such as Artificial Intelligence, will lead to the elimination of a large percentage of jobs that currently exist.
  1. The US has often complained of exchange rate manipulation as a form of unfair trade. Exchange rate manipulation is recognized as a problem in the articles of both the International Monetary Fund (IMF) and the WTO.
  • The IMF is specifically mandated to identify cases of currency manipulation. There is obviously room here for clarifying procedures and streamlining them to facilitate “legitimate multilaterally sanctioned action” against unfair trade.
  • The WTO can legitimize trade retaliation against a country that is found to be engaging in currency manipulation.

The way forward

  • We should use the G20 Summit, to be held in Argentina in November, to have a full discussion on the multilateral trading system at the Summit level.
  • The G20 at the summit level was extremely effective after the financial crisis in 2008 when it delivered results which were not forthcoming from the G20 finance ministers meet. If the world is indeed on the brink of trade wars, it is time for the G20 Summit to get into action again.
  • Reaching an agreement on trade will be more difficult than in the IMF and the World Bank. These institutions require only a decision of the boards, based on weighted voting. The US vote share allows it to veto anything it doesn’t want, but once the US is on board, anything the G20 collectively agrees on will sail through. This is not true of the WTO, where decisions are by consensus.
  • However, a consensus among the G20, which account for 80% of world trade, would create a strong basis for action.
  • This is also the right time to reconsider the consensus rule and let decisions in the WTO be taken on the basis of a weighted majority vote, with the weights being the share of trade in goods and services.

Concluding remarks

  • In a world where dark clouds are gathering over multilateral trade, India would do well to accelerate its integration into regional groups such as the Regional Comprehensive Economic Partnership and the India-European Union Free Trade Agreement which we have been negotiating for far too long.

2. Outward flow

  1. The first is the Aditya Birla Group-promoted Hindalco’s purchase of American aluminium rolled products maker Aleris Corporation and the Shroff family-controlled UPL Ltd’s buyout of the North Carolina-based agrochemicals major, Arysta LifeScience
  2. With Aleris, Hindalco will become a truly value-added aluminium player, as against just a primary metal supplier
  3. The Arysta deal could, likewise, make UPL the fifth biggest global crop protection chemical company

What does this mean for industries in India?

  1. The above acquisitions are significant from the concerned companies’ standpoint
  2. To the extent the strengthened global footprint from these leads to increased sourcing from their Indian manufacturing facilities, there would be some domestic spinoffs as well
  3. It is good that Indian corporates are emboldened to make big investments

Need of the hour

  1. From an overall Indian perspective, this basically represents outward foreign direct investment
  2. What the country really needs today is more investment within the country, whether by domestic or foreign companies

The situation of Indian Economy

  1. The Indian economy is today at a crossroads
  2. The ghosts of demonetisation and GST have been laid to rest, even as the new indirect tax regime has settled down enough to prompt a rationalisation of rates
  3. The “micros”, as far as debt-equity or interest coverage ratios of corporates go, have also improved for many to consider resuming investments
  4. There are two things that are restraining them now:
  • The first is political uncertainty, which may go up in the run-up to next year’s national elections
  • The second is the not-so-great “macros” — global crude prices, rupee, interest rates and fiscal deficits

Way Forward

  1. Adherence to fiscal discipline is what India really needs
  2. It can make a huge difference to investor perception, more so in an uncertain global environment

3. Country life

While Bihar does battle with the bottle, Chhattisgarh plans to shed the colonial hangover and mainstream mahua

  1. As part of a remarkable push to market forest produce from the tribal belt of central India, the Tribal Affairs Ministry plans to bottle mahua from Chhattisgarh and mainstream its sale all over the country
  2. Other produce like amla and tamarind will also be incorporated into jams and candies, but these may not be immediately successful since they would have to do battle with established brands

Unique decision

  1. The decision to market mahua reverses the tide of history
  2. Country liquor was marginalised in colonial times in favour of a class of dodgy produce with a patently dodgy name — Indian Made Foreign Liquor

Support for tradition

  1. Mahua has persisted in subcultures across the country, rejoicing in the names of the fruits, like santra, from which these beverages are made
  2. Besides, recipes from times past linger in the collective memory of some old families and communities
  3. The central ministry has done the right thing by the people of Bastar, from where most of the mahua to be bottled will be sourced
  4. Indian companies have recently focused on premium products suitable for the international market
  5. Country liquors, professionally bottled, would add to the bouquet

Way Forward

  1. Bottled mahua is a unique product and its success is guaranteed
  2. Apart from offering Indians a healthier alternative to cheap IMFL, they could create a brand new segment in the export market

4. Srikrishna panel upholds primacy of data privacy

Draft Personal Data Protection bill, 2018

  1. The right to privacy is a fundamental right which necessitates protection of personal data as an essential facet of informational privacy says the draft Personal Data Protection bill, 2018.
  2. It was submitted to the government by a high-level expert group headed by former Supreme Court judge B.N. Srikrishna.
  3. The much-awaited bill is under the government’s review and has been made public for inviting suggestions.

Provisions of the Bill

  1. The bill deals with issues such as collection and processing of personal data, consent of individuals, penalties and compensation, code of conduct and an enforcement model.
  2. According to the draft bill, personal data collected, used, shared, disclosed or otherwise processed by companies incorporated under Indian law will be covered, irrespective of where it is actually processed in India.

Data Protection Authority of India (DPA)

  1. It proposes setting up of a DPA, an independent regulatory body responsible for the enforcement and effective implementation of the law, consisting of a chairperson and six full-time members.
  2. In case of any appeal against an order of the DPA, an appellate tribunal should be established or an existing appellate tribunal should be granted powers to hear and dispose of any appeal.

Highlights of the Panel Report

  1. The committee has recommended phased timelines for the adoption of different aspects of the privacy law, making data protection a critical component in India’s security posture.
  2. The report said that sensitive personal data will include passwords, financial data, health data, official identifier, sex life, sexual orientation, biometric and genetic data, and data that reveals transgender status, intersex status, caste, tribe, religious or political beliefs or affiliations of an individual.
  3. It noted that consent should be the lawful basis for the processing of personal data and the consent should be free, informed, specific, clear and capable of being withdrawn.
  4. For sensitive personal data, consent should be explicit.

Right to be forgotten

  1. The committee came out with a recommendation on the right to be forgotten.
  2. It said that the right should be adopted, with the proposed data protection authority determining the eligibility of the application on the basis of five points which are:
  • Sensitivity of the personal data sought to be restricted
  • Scale of disclosure sought to be restricted
  • Role of the data principal (whose data it is) in public life
  • Relevance of the personal data to the public
  • Nature of the disclosure.

Penalty Provisions

  1. Regarding data misuse, the committee recommended a penalty of either a certain percentage of the total worldwide turnover of the data misuser, or a fixed amount set by the law.
  2. It recommended that the penalty may extend up to ₹5 crore or 2% of the data misuser’s total worldwide turnover of the preceding financial year, whichever is higher in situations where the company fails to take “prompt and appropriate action” in response to a data security breach.
  3. In situations where the norms on personal data, sensitive personal data, and the personal data on children are violated, the report has recommended a penalty of ₹15 crore or 4% of the total worldwide turnover of the preceding financial year of the company

5. India to give flash flood warning to Asian nations

  • India has been designated as a nodal centre for preparing flash-flood forecasts by the World Meteorological Organization (WMO).
  • This means that India will have to develop a customised model that can issue advance warning of floods in Vietnam, Sri Lanka, Myanmar and Thailand.

Weather model

  • The IMD would be working to customise a weather model, developed by the United States and donated to the WMO, to warn of flash floods at least six hours in advance.
  • A test version of this was being tried out by the IMD, and that was able to give a flood warning about an hour in advance.
  • Using a combination of satellite mapping and ground-based observation, this system — called the Flash Flood Guidance System — aims to provide forecasts six hours in advance.

Significance

  • Like India, several southeast Asian countries depend on the monsoon and are prone to its vagaries.
  • The WMO says flash floods account for 85% of flooding incidents across the world, causing some 5,000 deaths each year.
  • The proposed model would provide forecasts by computing the likelihood of rainfall and the soil moisture levels to warn of possible floods.

Concerns

  • Though Pakistan was among the list of countries that would benefit from the forecast, it had refused to participate in the scheme.
  • While the science to warn of floods could be developed, India was yet to work out how exactly it would warn countries of potential inundation.

CWC

  • India currently has a warning system for tsunamis that also doubles up as a warning system for several Asian countries.
  • The Central Water Commission, which monitors India’s dams, warns of rising water levels in the reservoirs, which are usually taken to be signs of imminent floods.
  • The organisation has recently tied up with Google to develop a software application to visualise rising water levels during heavy rains.

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