Geopolitics of trade: India needs to find a suitable place
by Ashok B Sharma on 08 Apr 2015 1 Comment
In today’s multipolar world several key actors are engaged in defining their spheres of influence. The two main pillars in this game of evolving geo-politics are trade and security. While geo-politics is the driving force, geo-economics is being designed to be its base. A number of mega regional trade arrangements (RTAs) are being floated by the main actors. Such attempts are likely to squeeze India’s space for developing its own security and trade architecture; hence India needs to step up its diplomatic engagements with prospective partners for its security interests and align itself with combinations or trade blocs conducive to its interests.


The global slowdown that resulted from the collapse of Lehman Brothers in the US in the latter half of 2008 caused much redrawing of trade engagements in the world. The European Union, which is struggling to deal with the hangover of its Sovereign Debt Crisis, is unable to come out of recession as the situation is further aggravated by involvement in the Ukraine crisis. Comparatively, President Obama has been successful in pulling out US from the recession and the country is growing at 3.1 per cent per annum. The EU-15 countries are growing slowly at 1.2 per cent.


The EU has become more protectionist in trade, particularly with the developing world and as negotiations in the WTO are in deadlock, it has chosen to align itself with US in Trans-Atlantic Trade and Investment Partnership (TTIP). The US floated the Trans-Pacific Partnership (TPP) and considers TTIP a companion agreement to TPP. Washington’s interests in the Asia-Pacific is not new. The Obama Administration’s “rebalancing in Asia-Pacific” and “pivot” to the region is a hangover of South-East Asia Treaty Organisation (SEATO). With the global economic pole gradually shifting to Asia-Pacific the western powers have become more interested in the region.


The TPP led by US has 12 participating countries like Canada, Mexico, Peru, Chile, Malaysia, Singapore, Brunei, Vietnam, Japan, Australia and New Zealand. TPP seems to be at the most advanced stage of development and is likely to erode existing preferences for Indian products in these markets and will put a greater burden on compliance by Indian industry and service sector. The TPP is likely to have stringent environmental, labour, intellectual property norms that may be impractical for compliance by India.


The TPP is designed to scuttle the earlier proposed Regional Comprehensive Economic Partnership (RCEP) with the centrality of ASEAN. Apart from 10 ASEAN members the ASEAN FTA partner countries like China, India, Japan, South Korea, Australia and New Zealand are associated with it. The overlapping membership of TPP and RCEP shows that the move for TPP is an effort to scuttle RCEP. The ASEAN is slated to move towards a common economic community by January 1, 2016 and subsequently towards a political security community and socio-cultural community. The RCEP arrangement will be most conducive to India’s interests and it should push for its early conclusion and always continue to stress upon the centrality of ASEAN.


Apprehending exclusion from the mega trade arrangements, China floated another concept of Asia-Pacific Free Trade Area in the last APEC Summit. To add to its economic muscle, China has also launched Asia Infrastructure Investment Bank in which India is also a member. Beijing’s interests in the region are well known with its extension of “String of Pearls” in the Indian Ocean, concept of One Belt One Road, Maritime Silk Route, BCIM Corridor. Also China’s aggressive postures in South China Sea like Nine Dash Lines, Air Defence Identification Zone, creation of artificial islands, pose problems for Indian oil assets off the coast of Vietnam. 


Comparatively, India’s plans for connectivity in the region like India-Myanmar-Thailand Trilateral Highway, Kaladan Multi-modal transit project, opening up more trading points at India-Myanmar border are moving at a very slow pace. China is an emerging power and it is natural for it to have its own ambition in the region. It is time for India to wake up from its deep slumber and engage with the countries in the region for collective security and trade. 


Russia which has recently floated the Eurasian Economic Union has plans to play an effective role in the region. India’s plan to use Chabahar port in Iran for rail and road connectivity to Afghanistan and beyond to Central Asia and Russia is yet to reach its full potential.


Apart from addressing infrastructure problems, India should step up efforts to be part of the global value chain in a big way. Direct import of rough diamonds from Russia for processing in the country for re-exports, import of crude oil and processing it in refineries for re-export of petro-products are successful examples of participation in the global value chain. In bilateral and regional trade arrangements, rules of origin should be eased and simplified to locate India effectively in global and regional value chains. Imports should be facilitated for specific raw materials, intermediates and capital goods for stimulating value added domestic manufacturing.


Careful market strategy should be in place to promote exports of products in which India has competitive advantage like services, pharmaceuticals, gems and jewelry, agriculture, plantation and marine products, leather products and textiles, handicrafts, auto parts and small cars. India should increase exports of high value agri products like processed food and organic food. Care should be taken not to approve GM food crops for commercial cultivation in the country as this would affect India’s exports to EU. Exports of high value engineering products, electronics, medical devices and equipment, defence products can be viable when ‘Make in India’ programme becomes a reality. Project exports to developing and least developed countries should be promoted in a big way.  


Diplomatic efforts should be in place to deal with major players. IPR issues, immigration and skilled related policies of US, demanding market access for services in Canada, bypassing NAFTA rules for trade with Canada and Mexico, EU’s SPS quota regime and data exclusivity norms, China denying Indian pharma, IT and ITES and agro exports, sorting out delays, infrastructure problems, non-tariff barriers, SPS regime with Russia are some of the issues India needs to take up with relevant countries to boost trade relations.


As the developed nations, particularly EU are in recession, India needs to diversify its products for exports and expand its bases in new markets in Latin America and Caribbean, Africa, non-EU countries in Europe, Eurasia including Russia, Pacific countries including Australia and New Zealand, West Asia, South-East Asia, South Asia and East Asia. These efforts can help India to raise its exports from $465.9 billion to a considerably higher level, if not at $900 billion by 2019-20 as envisaged in the new Foreign Trade Policy. Bilaterally dealing with countries in the proposed mega regional trade arrangements in which India may not be part can also help in maintaining its position in global trade dynamics.  

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