Tariffs are taxes on imports and meant to protect domestic industries. But since most factories rely on imported inputs, protectionism often ends up taxing industrial production and exports.

The economic warfare of the 1930s gave way to gun battles in 1939. World War II lasted six painful years. The world realised that arbitrary trade restrictions could have devastating consequences. As the war ended, a new set of institutions was set up to promote global cooperation on trade and investment flows.

The Generalized Agreement on Tariffs and Trade (GATT) was first signed by 23 countries — including India — in 1947. Over the next few decades, the agreement went through several rounds of revisions even as many more countries joined the global trading regime. GATT’s success in lowering trade frictions paved the way for the setting up of the World Trade Organization (WTO) in 1995.

Despite Trump’s claims, the global trading regime has served the interests of the leading superpower over the past seven decades. It has helped American companies access markets across the globe and allowed American consumers cheap access to global produce. But the gains did not flow just in one direction. As trade boosted the global economy, other economies began growing fast. Western Europe was an early beneficiary, then Japan, and then East Asia. T

he world’s two most populous countries — China and India — are the most recent beneficiaries of the global trading regime.

It is not a coincidence that trade gets bad press in the West precisely when the East scores big wins. Much before China became the global villain, Japan was accused of “stealing” western technology. American politicians alleged that a cheap yen had allowed Japanese products to flood American markets. Since Japan depends on American forces for its defence, it was compelled to revalue its currency as part of the 1985 Plaza Accord.

A costlier yen made American investments cheaper for the Japanese. When Japanese companies used their newfound (dollar) wealth to buy out American icons such as the Rockefeller Center in Manhattan, they faced renewed criticism. Donald Trump, then a real estate tycoon, took out a full-page ad in The New York Times castigating American politicians for failing to stand up to Japan.

To be sure, current concerns about China’s trade and investment flows are not driven only by xenophobia. Ever since it joined WTO, the Chinese Communist Party (CCP) has flouted fair trade principles, and used State-owned enterprises to buy influence across the globe.

It has made no secret of its ambitions to dominate its neighbourhood. For most of Asia, a global economy dominated by Xi Jinping is an even more frightening prospect than one dominated by Donald Trump.

India’s immediate response to the current trade conflict has been sensible. It has engaged with the Trump administration to bring down tariff rates without mimicking Trump’s actions against China. It has also sought to expedite trade agreements with other countries.

India must offer a more strategic and ambitious response. As one of the world’s largest economies, it must articulate its vision of the global trading regime. India should lobby for WTO reforms to make it a more decisive and responsive body. While WTO has some safeguards that address national security concerns, we need more thinking on how to strengthen them.

Countries that weaponise their trade relationships should face immediate and effective sanctions from the global body. Countries that use other economies as dumping grounds for their excess produce should face hefty penalties. A handful of countries should not be allowed to hold multilateral negotiations to ransom. WTO decisions could be based on voting rather than on consensus, for instance. If that means more safeguards for developing countries, so be it.

India will be able to reshape the global conversation on trade only when it is seen to be committed to the ideals of free and fair trade. It must stop experimenting with ad hoc protectionist measures.

For most of India’s history, our civil servants have been in love with import quotas and tariffs. It gave them a sense of control even as economic output suffered. They need to be vaccinated against the virus of protectionism before India offers a cure to the world.

Pramit Bhattacharya is a Chennai-based journalist. The views expressed are personal