India’s international trade policy at a crossroads

By Xie Chao Source:Global Times Published: 2019/7/1 18:18:40

Photo: IC

As an emerging economy that can utilize multiple sources in major power relations, India now stands at a crossroads. It believes that a historical moment has come when China is developing its manufacturing sector, and turbulent trading relations between Beijing and Washington have opened potential markets for other countries. 

But US President Donald Trump's doctrine on trade reciprocity may pour water on India's hopes. On economic relations with the US, India is concerned that its economic rise might be scuppered by the Trump administration's obsession with protectionism and unilateralism.

Indian Prime Minister Narendra Modi's government is obliged to protect the country's emerging manufacturing industries from fierce foreign competition and catapult its Make in India campaign to the international stage. But it has also been alarmed by recent trade conflicts and increasing pressure from the US government to ease restrictions on American companies entering the Indian market and lower tariff barriers.

Ahead of the G20 summit in Japan, US Secretary of State Mike Pompeo visited New Delhi. Pompeo said that Washington would consider all policy tools to ensure that India can meet its crude oil needs after being told that New Delhi was hit by debilitating US sanctions on importing Iranian and Venezuelan oil. But such verbal promises mean nothing if no waiver is given to India. 

India is an oil buyer with reasonable hope of diversified sources. The US is an emerging energy supplier and also an uninvited world policeman to the market. This has made India-US trading relations much more complicated. Any attempts at forcing India to buy more gas and oil from the US or its allies will be resented by the Indian government because the diversity of crude oil supply is reduced and might increase India's strategic dependence on the US when mutual trust is low.

It is an established policy of the Modi government to deepen strategic cooperation with the US, but the Trump administration is clearly delinking economic issues from strategic cooperation, forcing India to the trade talks table. 

India might have to invest a great deal of strategic assets to engage in security cooperation with the US but at the same time make more concessions on trade. The Indian government is gaining little from the relationship and Pompeo's visit didn't offer any concrete measures to ease concerns.

As far as India-China trade relations go, India is wary of the economic prowess of China, which now is a leading country safeguarding free and open trade. While trade conflicts between China and the US attract attention, it was India that filed most anti-dumping cases against China, and most investigations led to anti-dumping duties.

India doesn't have any bilateral or multilateral free trade agreement with China. This has affected many regional policies of New Delhi, for instance its attitude toward the RCEP (Regional Comprehensive Economic Partnership), which, after being signed, will be the largest free trade agreement in the world and bring stability to an otherwise unstable international trading system. The chief concern is that India needs to protect its companies from Chinese competition.

India is also constantly complaining about trade deficit with China and urging it to import more Indian goods. To sum it up, India is neither a solid supporter of free and open trade, nor a net winner in Trump's unilateral attempt to reorganize free trade. India could stand together with China to safeguard multilateralism but its trading relations with China have much scope for improvement.

The good news is that trading issues between India and China are largely handled within existing international principles and both governments are discussing ways to improve trading practices and their trading volume is expected to exceed $100 billion very soon.

The author is an assistant research fellow, Institute for International and Area Studies, Tsinghua University, and a visiting faculty scholar (2018-19), Jindal School of International Affairs, O.P. Jindal Global University, India.


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