Author: Stefano Gatto

The complex negotiations of the so-called Doha Development Agenda (DDA) seem to have definitively ground to halt at the end of July. Not that progress in the negotiations had ever been particularly fast since 2 November 2001, when they were launched in the Qatar capital. It can hardly be claimed that optimism had ever prevailed over pessimism in the experts assessments throughout this period: the skies over Doha were always decidedly grey and many observers felt that finding a solution to these negotiations was rather like squaring the circle. There are too many conflicting interests, too many chapters still open, and not enough goodwill on the part of the main actors.

Given the importance for the whole world economy of a successful outcome to the negotiations, there was still hope that a virtuous circle could be set in motion by some concessions made – or least announced – by the big members of World Trade Council (WTO), like the European Union or the United States,thus inducing other members to move away from their initial positions.

A development of this kind had been expected and called for over the last five years. But at present a reverse trend seems to prevail. The initial positions have been consolidated and this has led to stalemate.

In 1994, the Uruguay Round ended with the creation of the WTO, a very important new development not only for international trade but also for the whole system of international relations.

In fact replacing the existing General Agreement on Trade and Tariffs (GATT), no longer a treaty, but a full-bodied organisation with coercive powers, thanks to the existence of a system for settling disputes between members ensuring the rules are respected, turned out to be a step forward of great importance for international governance.

Despite the considerable criticism levelled at the WTO, especially from the South of the world and the ‘alterglobal movements, I believe we can objectively claim that progress was actually made and that an international organisation has shown it can make regulations and have them respected. The problem is thus not to reduce the WTO’s powers, as many rather unthinkingly claim, but to flank the WTO’s powers in the trade world with similar powers for multilateral organisations in other fields, such as the environment, social affairs, and energy, in which at present international conventions combine great ambitions with little power.

For example, the United Nations can be widely criticised, but normally this is done on account of its ineffectualness. There can be no doubt that if, in the field of collective security, the United Nations had the same kind of powers created by the WTO, there would be much more chance for peace in the world than with a system still granting some members the right to veto.

Contrary to what is often claimed, the problem is not to have less WTO but rather to have more. In-depth studies have shown that the WTO method for settling disputes is much fairer than is normally believed. Far from being biased in favour of the more powerful countries, it is a thoroughgoing system of rules. Over the years it has worked in favour of more influential members, like the USA and EU, but often it has also favoured other members, opposed to
them.

The jurisprudence of the WTO panel is full of cases won by developing countries over developed countries, and this proves that despite everything in the WTO the rules prevail over the identity of the litigants.

It is thus unfair to describe the WTO as an organisation at the service of the leading players in global trade used to keep all the others in line – a kind of steam roller for globalisation, blind and deaf to the problems of the world.

If anything, the current outlook of the WTO, and it is reflected in the Doha Round, is not so much to balance the way in which disputes are settled, but to define rules encouraging a greater opening up of markets to products from developing countries, especially in the sector of agriculture.

This is the significance of the DDA, and the starting point for analysing the current stalemate.

Like the previous rounds, the Uruguay Round focused on the aspects underlying the creation of GATT: a reduction in industrial tariffs (and duties). This process is almost complete, at least as far as the developed countries are concerned.
They have, however, kept some ‘tariff peaks’ and resort to so-called ‘tariff escalation’ for some products imported from developing countries, and these two exceptions tend to dilute the effects of the almost total abolition of duties.

Making the further reduction in tariffs established by the Uruguay Round acceptable to other WTO members required a reform (beginning in 2000) of the rules on agricultural and services trade, still only in their infancy at the time, especially when compared to other tariff reductions. For many developing countries, the revenue from duty on imported products was a primary source of fiscal income. An indiscriminate reduction in the duties would thus be a serious threat to state budgets and it should be offset by greater opportunities for national products on the markets of developed countries. In the absence of this kind of incentive, it is very difficult to propose speeding up the tariff reduction process to a developing country.

In the case of industrial duties (in WTO jargon NAMA, Non Agricultural Market Access) the commitments made in multilateral contexts concern the so-called bound duties’, normally higher than those actually applied. A WTO member pledges a gradual reduction in duties on most products according to a established schedule (slower for developing countries), but is free to reduce them further following internal trade liberalisation plans (which was the rule almost everywhere in the 1990s).

Emerging countries like India and Brazil, notoriously little inclined to make significant commitments at multilateral level, and which still have duties above the average, can, however, count on a considerable spread between bound rates and applied rates. This means they could fairly easily introduce further reductions in rates.

As we said, the reform of the agricultural and service regimes was to have begun in 2000.

Even before then, the USA and especially the EU had suggested accompanying the revision of the rules with negotiations on other products, to broaden the scope of the negotiations: multilateral rules on investments, competition, and government procurement were seen as indispensable, given the strong correlation between these phenomena and trade (over a fourth of world trade depends on direct investments).

At that time there was talk of the so-called Millennium Round, which disastrously ran aground at Seattle in 2000, when for the first time the WTO became the subject of front page reports because of the mobilisation of nongovernment organisations from many parts of the world protesting against the widening of the trade agenda.

The idea behind the protests was to focus world attention on what was seen as a method for rich countries and international technocrats to impose oppressive rules on poorer countries.

The failure of the Seattle conference was not only a key moment for strengthening the ‘alterglobal’ movements, for which the WTO had become a traditional enemy. It also marked the end of a period in which the big powers, i.e. the USA and the EU, representing forty per cent of world trade, could impose their will on the rules being drafted.

Since Seattle, the transversal alliance between countries in the South and activists in the North has made this dimension utopian, and reaching agreement in the WTO has now become much more complex than it was at the time of the Uruguay Round.

In November 2001 the launching of the Doha Development Agenda was possible only for two reasons: the negotiations were given the priority objective of defining rules aimed at encouraging greater involvement of developing countries in world trade (hence the name) and the aftermath of 9/11 played in favour of this agreement: the new round of trade negotiations was the first great opportunity to introduce more democracy to the world, and make the distribution of resources less unfair (presupposing that international terrorism was really driven by economic injustice, which is far from having been demonstrated).

There were, however, many still unsolved issues at Doha. While at Seattle the aim was to define the parameters for the final agreement of the Round, at Doha there has been a much more modest move to define the starting point for negotiations, postponing the decision on the inclusion or not on the agenda of the so-called Singapore Issues: Investments, Competition, Government Procurement and Trade Facilitation. The EU attaches particular importance to these topics, partly to attenuate the possible impact of the forced opening up of itssown o agricultural markets.

At Cancún in September 2003, a conference originally conceived as an intermediary stage towards the completion of the Round, expected by late 2005, discussions were very heated. Under the leadership of Brazil and India, the new G20 group brought together developing or emerging countries interested in opening up agricultural trade, objectively lagging behind in terms of liberalisation compared to industrial production. They then managed to impose their own line, whereby DDA was primarily to be an agricultural negotiation.

Only one of the Singapore Issues (the trade facilitation measures) has stayed on the agenda, while the others were excluded. Since Cancún it has become obvious that with the waning of the EUUS’s powers of persuasion, highlighted at Seattle, there is now a greater scope for aggregation for developing countries. Thus for example, we have the G20, whose leading members are India, Brazil and South Africa and which is still primarily an agricultural alliance, but also the G90, bringing together the poorer countries which still can’t be described as ’emerging’.

The WTO negotiations are being played out on a very complex multi-dimensional chessboard, involving frequent mini-ministerial meetings (with key members – the EU, USA, Brazil, India and Australia, as well as the WTO Director General and ‘negotiations facilitator’, initially Supachai Panitchpakdi from Thailand, and now the Frenchman Pascal Lamy, former European Commissioner for Trade).
The situation has been further complicated by complex exercises in co-ordination involving the various regional groups and lobbies, in an overall structure with extremely sophisticated variable geometry. At the WTO, an organisation governing very concrete economic interests, the alliances are neither fixed nor ideological, butvariable and a function of the interests at stake in each specific issue.

Thus to speak of all-embracing strategic alliances in the WTO is completely wide of the mark. On certain issues, the USA and the EU can agree (reduction of industrial tariffs in emerging countries and rules on industrial property rights) while on others the EU is far from American positions and nearer to the position of some developing countries (such as products with geographical indications and caution on agricultural reform) but not on others (the elimination of subsidies for farmers). And so on. As we said the ‘chessboard’ has become increasingly complicated thus leading to the arguably inevitable stalemate.

Although the negotiations seemed to have been proclaimed dead at various time in the five-year period, on several occasions hopes were actually rekindled. Such as in July 2004, when the so called Geneva Framework Agreement appeared to provide a platform for re-launching the negotiations.

We can say that since the beginning of this year, the emphasis on the agricultural chapter had meant that the greatest pressure was on the EU, which pays the highest subsidies to its own farmers.

The fact that the EU is at the same time the most generous in terms of opening up its own market to products from less developed countries (the seventy Least Developed Countries, whose products enter with no duties apart from the controversial exceptions of rice, sugar and coffee – products of enormous importance for LDC exporters) and that Brussels has proposed a zero cost cycle for the poorest countries (which would not be a required to make concessions), and also the definitive abolition of distorting subsidies onon exports, has gradually shifted the pressure onto the USA, which has seemed unable, however, in the five years, to provide practical proposals reflecting their frequent free-market pronunciations.

Since 2001, preoccupied with a very different international agenda, the USA has given the impression of not attaching much importance to these negotiations. Even its surprisingly active approach to a bilateral trade agreements – conceived as a prize for more reasonable partners rather than real weddings of interest between equals – and the recent replacement of the chief negotiator (the US Trade Representative) Robert Portman with Susan Schwab would seem to suggest that Washington doesn’t believe in the feasibility of the Doha negotiations. Moreover, the Trade Promotion Authority, allowing President Bush to sign international trade agreements without the ratification of the Senate, will expire in March 2007, and he seems unable, or doesn’t even want, to ask for an extension.

Having invested a good deal at Doha under the leadership of Pacal Lamy, the EU stepped up its efforts even further after the appointment of his replacement Peter Mandelson. New offers have been made on agriculture and services, but they are stillviewed as too modest by the main partners: Australia, the Cairns Group and the G20 as regards agriculture; India and the developed countries on the subject of services.

The two key emerging countries, India and Brazil are in a very special position.
Their strategic influence within the WTO is much greater than their effective trade power. This due to theircapacity to lead the rest of the developing world and the acknowledged skill of their negotiators, among the best in the world (the WTO negotiations require extraordinary technical competence, and every week dozens of pages of extremely complex proposals have to be studied, analysed and answered).

Here we are talking of large emerging economies, but full of contradictions. They are competitive in certain sectors (agriculture in Brazil, and services in India), but lag behind in others. These countries have both gradually reduced their duties, which, however, are still higher than the world average.

Having recently joined the WTO, China has decided not to play an active role, keeping out of the fray and monitoring the negotiations from a distance. China is in no hurry to exercise all of its huge potential, aware that it could further upset the already precarious balances.

Since the Hong Kong Ministerial Conference (December 2005) it has been increasingly clear that such a complex negotiation could not have been concluded through unilateral offers or efforts by one of the sides. Rather a concerted effort is required in which all the various countries are asked to make sacrifices in proportion to their economic power: large sacrifices for developed countries, intermediary for emerging countries and small or nothing for the poorest.

By starting from this principle, a winwin package could have been identified in which all the sides would haven been given some satisfaction, thus making the negotiations more attractive.

This virtuous trend, however, has still not emerged. At the time of the breakdown of negotiations, only a few days after the St Petersburg G7 summit had called for their completion, we can sum up and suggest that the successful solution should come from the combination of a new American proposal to reduce its own internal subsidies to farmers (which strongly influence world prices) and a further European proposal to reduce their own agricultural tariff peaks (the exceptionally high duties on some sensitive products like milk and meat) and a significant reduction in industrial tariffs by Brazil and India.

If all this happened, it could trigger of the virtuous cycle called for by everyone, beginning with the more ambitious proposals for the liberalisation of services. At Hong Kong it was decided that agreement could only reached sector by sector and be ‘plurilateral’, and therefore not include all WTO members (developing countries are not generally inclined to open up their service sector to international competition), but only those actually interested.

Once the big issues have been solved, the new climate could probably lead to the signing of agreements in other fields, such as the definition of measures for simplifying customs procedures (‘trade facilitation’), more transparent shared rules on anti-dumping, the setting up of a multilateral register for the geographical indications of products and so on, all
liable to have positive effects on trade.

But this will probably not happen, at least not in the near future. Everyone expects their neighbour to make the first move, and in this way nobody moves.

Despite the international instability due to terrorism and the rising prices of raw materials, the international economy is enjoying growth, and this has possibly weakened the arguments of those who consider a success at the WTO negotiations to be indispensable.

Moreover, the new complexity of international relations, especially economic relations, in the light of the emergence of the Asian countries and the new variable geometries dominating the WTO suggests that the pause for reflection will be salutary. If the negotiations were to be completed today, the result would be a minor agreement, ultimately of no interest to anyone.

One player who could suffer most, from the point of view of the system rather than economically, is the EU. It draws its international strength above all from its economic and trade influence, where it has clear and proven competence. Hence the importance the EU attaches to strengthening the WTO multilateral system, in which it is a great protagonist.

Any weakening of the multilateral trade system – as is currently emerging – implies less influence for the EU in an area in which it has been particularly strong.

The challenge for the EU after Doha will be to adapt its trade diplomacy to a situation in which bilateral and regional agreements will prevail, thus creating what some have described as the ‘spaghetti bowl’: an enormous number of preferential agreements, incredibly complex to understand and manage.

Keen to extend strong multilateral rules, the EU will not necessarily be penalised by this new situation but it will have to negotiate with greater flexibility (different agreements for different partners – not always easy for the complex European negotiation machinery involving the Council, Commission, Parliament and national political sensibilities, not to mention the increasingly powerful network of civil society).

Paradoxically those who will suffer most from the failure of Doha will be those who should have been the main beneficiaries: the less developed countries. In a complex network of bilateral agreements, who will bother negotiating with them? The emerging economies attract the interest of everyone, those less developed of very few.

Those in the world of social activism, jubilant at the ‘defeat of the WTO’, could do well to ponder this paradox.

From 28 April to 10 May India will hold elections to vote for its fourteenth Parliament (Lok Sabha) since 1947. The country usually receives very little media coverage in Europe, and information about India is generally limited to a few stereotypes. On one hand, there are images of poverty and dramatic social injustice, and on the other, the country’s spiritual dimension. Both of these aspects contribute to the complexity of the country, but they are by no means the whole picture.

The Indian elites tend to be the victims of a basically similar blinkered vision: they literally overlook the existence of social problems in the country and focus all their attention on the effort for greater growth. What seems to attract their attention even more than economic development and improving living standards is acquiring international status as a superpower. Obsessed by the need to demonstrate at every step their cosmopolitanism, but also their original culture or ‘Indianness’, the well-off classes in the Indian population only see one India – the modern elitist country. The rest is overlooked, as if it didn’t exist.
Between these two extreme visions is the reall country of over one billion inhabitants (the second largest in the world), often also ignored because considered to be enigmatic or a sleeping giant unable to wake up. But over the last few years international interest in the country has suddenly been aroused, thanks to startling economic results and the even more impressive prospects for growth in the coming decades. At the Davos World Economic Forum, India was often at the centre of attention, along with its prospects for growth and hi-tech industry, while the alternative World Social Forum held in Bombay was a vehicle for those speaking out critically against that kind of development pattern.

In recent months in India a Goldman Sachs study has often been cited with a barely concealed triumphant tone. The study analyses the prospects of economic growth until 2050 for the four great emerging countries: China, India, Brazil and Russia. The conclusions of the study will surprise anyone used to looking at the world only through the lens of the present: extrapolating current and potential growth rates, these countries will spectacularly increase their economic importance and, therefore, their world influence in the coming decades. The figures are particularly important and significant in the case of the two Asian giants. In India they endlessly repeat that, according to the study, the GDP in India will be higher than in Italy by around 2016, and than in France and Britain by around 2020. India should thus rise to become the third largest economy in the world (after the United States and China) by midway through the century. Naturally everything ceteris paribus, i.e. taking for granted
that in this period growth rates will be similar to current rates (both in emerging countries and in the more mature economies).

The theories are thus fairly limiting, but equally, leaving aside the accuracy of the forecast as regards the precise moment of the ‘overtaking’, it seems difficult to argue against the overall trend suggested by the study. The world we are moving towards will be significantly different from today and in that context the little-known India will have a much different economic and geopolitical influence than at present.
The Goldman Sachs study quotes the absolute size of the GDP, not the per capita figure. In relative terms, in the 21st century the Chinese and Indian GDPS will remain well below those of the United States and Europe. But what will tip the balance towards Asia is the effect due to a combination of sustained economic growth and very high population levels: India and China together now have over 2.2 billion inhabitants. Even if their birth rates are dropping, as always in the presence of economic development, in a few decades time one inhabitant out of two in
the world will be Chinese or Indian!
China now receives a great deal of media attention. It is surely also worthwhile following a bit more closely Indian events to try and understand what kind of country we are talking about.
The parliamentary elections will last twenty days for the simple reason that the country is
immense and holding them simultaneously would require millions of electoral officials.

This is a reminder that India is in fact a democracy (China has no such problems) – the largest democracy in the world (a ‘vibrant democracy’, as they say here).
Since 1947 India has kept faith with this tradition. Except for a brief interlude in the days of Indira Gandhi (democratic guarantees were suspended from 1977-1979, leading to her immediate rejection by the electorate in the next vote), India has always functioned as a democracy. Some of the main aspects of this democratic system are debatable, such as the limit to certain economic and social rights, but it would be misleading to underestimate the scope of Indian democracy. It is an immense mainly poor country in which, however, authoritarian tendencies have never prevailed. There are no other examples in the world and this without doubt is an advantage, honouring the country and deserving credit.

Similarly, another aspect should also be stressed. Since the ‘Green Revolution’ in the 1970s, although hundreds of millions of people live in poverty, India is basically selfsufficient from the food point of view and today even exports farm produce.
Bearing in mind that famine was endemic in British India (with a population of less than 400 million inhabitants), today India manages to feed over a billion inhabitants with its own resources. This must be acknowledged as a remarkable achievement.
Democracy and self-sufficiency are key concepts in the Indian collective imagination and explain many of the political decisions made by the New Delhi governments over the years. Democracy is the outcome of a collective movement, which under the spiritual and political guidance of Mahatma Gandhi, won independence. A rare example in history of a combination of enlightened leadership and a pacifist movement ‘from below (today we would call it civil society), this movement was by nature democratic. Therefore to betray democracy would mean betraying the very roots of independent India.

Food self-sufficient is important because colonialism was a painful stage in the past which deeply marked India. Still mainly rural (around 700 million people live off the land), it suffered from the vested interests of the colonial power suffocating any attempts at independence. Colonial India produced what was convenient for the British Empire and, in turn, imported British manufactured goods on trading terms decided by London.
Even in the years after independence, chronic food shortages led to conflicts with the big powers (the United States and Soviet Union), which often used this arm to extend their influence. This explains the Indians’ hypersensitivity towards anyone trying to use economics as a form of pressure. Since the early days of independence India sought to develop an economy and industry firmly in national hands, and to eliminate any dependence on
foreigners in terms of investments and food imports.

Today foreign investments in India are much lower than those in other emerging economies, and foreign trade is a much lower share of the GDP than more developed countries or even developing countries. This is an ambivalent feature of the Indian economy: on one hand, it has preserved India from the painful cash crises besetting Latin America or other emerging countries, but on the other, it partly curbs the potential for growth in technological terms.
The nationalist development model, dating back to Nehru, was pursued by subsequent governments, but then abandoned in 1991, when the Rao government was forced to make a U-turn in terms of economic openness: the currency reserves had almost touched zero and growth had become weak, partly because of the high levels of control and regulation, typical of a planned economy like the Indian system with its permits and licences (the so-called ‘Licence Raj’).
A decade of economic reforms (privatisation, streamlining bureaucracy, liberalisation of the economy) led to a notable acceleration in growth rates, which reached levels unknown before the openness policy and led to a euphoria unthinkable in the past. In a far from brilliant international economic context, the Indian economy grew from six to eight per cent yearly and the accumulation over time of this growth became truly significant, especially bearing in mind the enormous gap between the 250 million Indians, part of the modern world economy, and the rest of the population.

Having said this, the Indian economy is still strongly agrarian (agriculture accounts for around a quarter of the GDP). In recent years there has been a remarkable rise in services, especially the production of software and outsourcing, thanks to remarkable Indian competitiveness in this sector: the population has a very high levels of education (several million graduates per year) perfectly at ease in English and with the use of high technology, and cost much less to employ than the international average.
This explains why half of the world’s software is produced in India today and most of the multinational technological development centres are in India, especially on the Bangalore-Hyderbad-Pune axis. Moreover, in the United States and Europe many companies in the sector are owned by Indians or include many Indian engineers in their staff.

This aspect should not be underestimated: most of India still lives on the sidelines of development, especially in the ‘Hindi belt’, basically most of Northern India, but the country has a very strong presence in sectors with most value added.This is not only a question of transferring low-cost jobs, but also in the conception and development of new products. India has a future, and a part of India is already in the future.
Of course high-tech industry can’t provide a billion Indians with jobs, but it does represent a crucially important development. India is a very unusual case in economic history: there are no other examples of developing economies in which the two main pillars are agriculture and services. To consolidate the prospects for growth, India must reinforce the industrial sector, also required to satisfy the growing demand for goods from the new middle classes, in the same way Italy did in the 1960s.
Today Indian manufacturing industry is on a vast scale, but in most cases is still unable
to produce quality goods able to compete on the world markets. This explains the Indian
governments reluctance to make significant reductions to the customs tariffs, currently
the highest in the world. This is a negative spiral, because many imports are required to
modernise manufacturing structures. The contradictions between India’s global ambitions and its ultra-conservative attitude as regards trade protection is still one of the issues to be solved in the near future. Future Indian governments will also have to tackle a number of other ongoing issues:

• – The modernisation of agriculture. Today Indian agriculture is still mainly at subsistence level, although relatively well mechanised (a legacy of the ‘Green Revolution’). There are still many limits to the free circulation of farm produce from one state to another, and enormous problems in financing and organising markets. Once the problem of food self-sufficiency has been solved, the next challenge will be modernising the sector, with an inevitable reduction in jobs.
  – The consequent population flow towards the cities will create considerable problems of sustainability. The Indian urban conglomerations are among the largest in the world, but their infrastructures are wholly inadequate. Further urban immigration will inevitably be a huge burden for the already unliveable cities lacking in clean water, electric energy, transport and housing.
  – The further economic development of India could be slowed down by inadequate infrastructures. Modern India is held back by its roads, electric energy, ports and airports. Significant progress will not be made without serious attempts to remedy these shortcomings.
  – To effect such enormous investments will require great efforts being made on modernising and moralising the political system. India has an unsustainable annual public deficit of ten per cent, mainly due to uncontrolled public spending, the outcome of the nepotistic management of public finances by a paternalist political system, dramatically anachronistic with regard to the needs of modern India. Unlike other emerging countries, although India has no need of a constant flow of foreign capital to boost its balance of payments, obviously mortgaging public resources in unproductive spending is not in the country’s interest.

Another great issue is the little attention paid by public authorities to what experience has shown to be the main pillars of development: education and health. In India there is a remarkable gap between the highly educated cosmopolitan elite, citizens of the world, and the great mass of the wretched poor, whose living conditions would be intolerable in the developed world. The Indian government dedicates almost negligible resources to public health and primary education, thus failing to close the ever-widening gap between the two Indias. Is this a sustainable situation for a country wishing to consolidate its growth?
There are no prizes for guessing that the next election will see an easy victory for the coalition led by the BJP (Bharatiya Janata Party, the Indian People’s Party). The National Democratic Alliance (NDA), consisting of around twenty parties, but under the clear leadership of the Hindu Nationalist Party of Prime Minister Atal Bihar Vajpayee, will reap the benefits of five years of economic achievements, the growing wealth of the middle classes (the main pillar of the BJP), and the modernisation of the country.

Although a more open economy was introduced in 1991 under the Congress government (the Finance Minister was Mahoman Singh), a large part of the dividends were due to the fact that the BJp persisted with the reforms. The BJp’s political project is ambivalent and must be seen to the background of its origins: the main leaders in the party are members of the Rashtriya Swayamsevak Sangh (Rss – National Volunteer Organisation), an ultra-nationalist movement with quasi-fascist leanings. To move from the almost insignificant position at the time of Rajiv Gandhi (in the early 1980s) to the majority rule of today, the party’s ideologists could also rely, however, on the physiological decline of the Indian Congress Party (or simply ‘the Congress’) – the legacy of the Gandhi-Nehru political tradition.

But they also stressed the ‘Hindu aspect’ in their language in order to create a new popular movement among the Indian masses, disappointed with the Congress and attracted to rally round the ‘saffron colour’ political agenda of Hindutva (‘Hindu-ness’), preaching the supremacy of the Hindus over other Indian communities (Muslim, Sikh, Christian, Buddhist and Jain).

Today the BJP pursues a political project apparently contradictory in Western eyes: it combines economic liberalism with a conservative social agenda aimed at perpetuating the original nature of Indian society, founded on the irremovable caste system and the mechanism of agreed marriages by families within the same caste – a very effective way of hanging on to privileges and power.
The Western experience suggests that economic transformations will pave the way to social transformation. But on observing India, this trend is much less obvious, which is in line with the BJp’s political project, currently the winning option. This aspect of BJP policy strikes at the heart of the key Congress notion of ‘secularism’, i.e. equality between the various religions in India. Although in different ways, both Gandhi and Nehru were convinced of the idea of a tolerant secular India, where the fact of being an Indian citizen should prevail over all other considerations. After the inevitable split with Pakistan, the Congress always pursued a policy of ‘secular unity’, albeit at times with difficulty (the clash with Sikh fundamentalism cost the life of Indira Gandhi) But the BIP has a different view of the matter.
For them the equality between communities is neither feasible nor advisable: the 850 million Hindus are the ‘real Indians’, while the 130 million Muslims, 40 million Christians and Sikhs are ‘less Indian’ compared to their Hindu counterparts.

This explains the existence of an ultra-Hindu agenda whose content seems improbable to outside observers: the controversial claims over Ayodhya (where the Hindu fundamentalists destroyed a mosque in 1992, accused of being built on the putative birthplace of Rama, one of the most important figures in Hinduism); a ban on butchering cattle (the sacred animal of Hinduism, but eaten by Muslims and Christians), the elimination of a specific civic code for Muslims, and a ban on religious conversions.
Even when there was a policy with a secular approach, conflicts between the various communities (a phenomenon called ‘Communalism’ in India) have periodically broken out since 1947. The growing references to a strictly Hindu policy preached by the BJP cast disturbing shadows on the future of the country, which has every interest in focusing all its energies on the other problems afflicting it, rather than putting up new barriers and sowing future conflicts.

The tragic events in Gujarat in 2001, when more than 2000 Muslims were slaughtered and the state failed to do its duty and stop the killing, is an example of the India horribilis that could prevail, if sectarianism was to gain the upper hand over the principle of peaceful co-existence.
Although the current coalition government is tackling this basic contradiction, the opposition, led by the heirs of the All India Congress, the party that governed India for most of the period from 1947 to 1999, seems incapable of proposing a credible alternative.
The defence of secularism from the rise of religious-based programs is a firm principle for the Congress, but it seems unable to halt the saffron-coloured tide of the BIP.

The Congress is also riddled with contradictions: it is still very dependent on the Gandhi family. Currently led by Sonia (Rajiv’s Italian-origin widow), who is attacked by the nationalists because as a foreigner she is deemed unfit to become Prime Minister, the party is still antiquated, badly organised and lacking in any coalition-building capacity – a necessity in a country characterised by an extremely fragmented political scene with regional parties becoming increasingly important.
The debate on whether Sonia Gandhi is Italian or Indian is just a pretext. She is an Indian citizen and therefore can lawfully stand for any public office, including the highest in the country. It is up to the electorate, as in any other democracy, to decide her fate. Sonia is very careful to behave as an Indian: she always wears a sari, often speaks in a good Hindi (although it is obviously not her native tongue). Seen from an Italian point of view, Sonia Gandhi is now objectively much more Indian than Italian.
Her political presence genuinely seems more to do with the need to keep the Nehru-inspired party united rather than any personal ambitions. In fact the candidacy of her thirty-three-year-old son Rahul in the next elections seems to foreshadow his future leadership of the party (his sister Priyanka, thirtyfour, could also have political ambitions).
Naturally we wonder if it is logical for a party with such a glorious past as the Congress Party to be led generation after generation by a member of the Gandhi family. But the concepts of family and dynasty are very important in Indian culture. An even more serious problem besetting the Congress Party is their vague program: the economic agenda is very similar to the BJP, albeit with a different perception of the social and farming problems in the country, but has been elaborated very little in the programs and speeches.

Nehru’s grand party still seems reluctant to undergo the streamlining required to stand as government force (this has been the case for decades), and the forthcoming presidential election holds little in store for them.
India is also facing a great change in its foreign policy. Traditionally jealous of its own independence and with the ambition to be the leader of developing countries, recently the government has moved away from some of its longest-standing traditional principles.
The usually tricky relationship with the United States has become much easier since the days of Clinton (although the nuclear tests in 1998 temporarily complicated matters). A new generation of Indian politicians who studied in the USA rather than Europe looks favourably to American society and wishes to emulate the economic behaviour, but not the social models. From the strategic point of view, the post-11 September scene gives India a key role insofar as it is a large democracy with ‘nuclear’ arms in a key strategic position between the crises-torn
Middle East and China, a great emerging power.

In the past closed off and little inclined to economic integration, India is now looking Eastwards with great interest: the traditional relationship of diffidence and competition with China is being transformed into an attempt at a strategic economic alliance between the two great emerging Eastern powers. As regards South-East Asia, India has changed its own reluctant position as regards trade liberalisation and has undertaken an ambitious cycles of trade negotiations with all of its neighbors (ASEAN, Thailand and Singapore).
To open up to the world, India needs to improve its relations with its closest neighbors, especially its traditional adversary, Pakistan.
Two years ago they were verging on a conflict with unpredictable consequences. Today the climate has improved considerably and the recent South Asian Association for Regional
Co-operation (SAARC) Summit at Islamabad (2 January 2004) opened up the prospects of a dialogue between New Delhi and Islamabad that had become an absolute necessity.
There are still many clouds hanging over on the relationship between India and Pakistan, which is being strongly encouraged by the United States and the European Union. The main obstacle is the perennial issue of Kashmir, a complicated question also due to the contrast between opposed fundamentalisms (making an Indian change his mind is no easy undertaking, and Pakistanis are first cousins).

There is also the interesting advent of a new South-South bloc, stretching from Brazil, through South Africa to India, which emerged forcefully at the Cancún Ministerial Conference. The G20 seems to be a summit updated by the non-aligned, but suited to the context of a globalised world. The fact is the alliance between the large emerging countries has enhanced the international scene and it would be a serious mistake to underestimate its importance and potential.
In this picture, the European Union and India have at times run into difficulty in coming together: but recent developments have revealed that both understand there is a mutual interest in developing synergies. The annual Eu-India Summit, now in its fourth year, is beginning to acquire more content and meaning. The Eu is India’s leading trade partner and investor, and has every interest in being involved with a country that will undoubtedly be a protagonist, albeit with many contradictions in the twenty-first century.
For its part, India has every interest in not underestimating its ties with Europe, which is gradually learning to appreciate many aspects of Indian culture: its spirituality, inventiveness, music, cuisine and cinema.
The forthcoming elections will not change these basic trends. But anyone who still believes that India is only a sleeping giant is seriously misguided.