Lazy capitalism

FE says,

The commerce secretary’s statement that free trade agreements (FTAs) would drive domestic reforms, and not vice-versa, indicates that India, making the best of a bad multilateral trade situation, is following the successful approach taken by the likes of Japan and Korea. Both countries used FTAs to break the stranglehold of pressure groups on trade policy and domestic reforms, even in sensitive sectors. Japan’s new FTA with Mexico, which not only opened up the Japanese market to cheaper agricultural imports but also blunted opposition from that country’s powerful agriculture lobby, best exemplifies this. Clearly, a country-based approach to opening up the economy makes pressure groups more amenable to persuasion. Moreover, given the Doha round’s virtual demise, FTAs are probably the best way to open up the Indian economy further.

Not everyone feels that way, though. Jagdish Bhagwati for one. He says,

We are thus (through these FTAs) reproducing in the world trading system, in the name of free trade but through free trade areas that spread discrimination against producers in non-member countries, the chaos that was created in the 1930s through similar uncoordinated pursuit of protectionism that discriminated in favour of domestic producers. In both cases, the preferred solution would have been non-discriminatory pursuit of freer trade.

It's interesting to see how the special economic zones are so much like free trade agreements. Like FTAs, SEZs are created in the name of friendlier policies (better infrastructure, less constraining labour laws, lower taxes etc), and like FTAs they discriminate against non-members. And yes, like FTAs, SEZs have support from reformers.