In this fast changing milieu, India must reevaluate its trade policy.
After years of negotiating, in November 2019, India chose to stay out of the Regional Comprehensive Economic Partnership (RCEP) — a trade agreement that includes 15 countries accounting for 30 per cent of global GDP, and around a quarter of world exports. Many had argued, then, that this was a lost opportunity. The argument was that staying out of such trade agreements, not being deeply integrated with the global value chains that run through these regions, was difficult to reconcile with the objective of becoming a global manufacturing hub, capturing export opportunities and foreign capital. There were concerns that the protectionist impulses that seemed to guide policy, tariff and non-tariff barriers, and other country-specific limitations would restrict the gains that could potentially flow from the escalating trade tensions between China and the US, and the China plus one strategy. As per a recent report by Oxford Economics, while India has “benefited from US trade rerouting away from China”, the gains have been to “a much lesser extent” when compared to other Asian countries such as Vietnam, Indonesia and Malaysia. Further, the report points out that the country has “not been able to attract a notably greater portion of global foreign direct investment, even as FDI flows to China plummeted”. In this context, the recent comments by the CEO of Niti Aayog, BVR Subrahmanyam on trade agreements, are welcome.
As reported in this paper, Subrahmanyam has said that India is missing out on the “China plus one” opportunity and that it should consider joining agreements such as the RCEP and the Comprehensive and Progressive Agreement for Trans Pacific Partnership. In principle, this is the right approach. Even countries like Sri Lanka and Bangladesh are looking to join the trade bloc. However, five years later, the world is a different place. The intervening years have seen a pandemic, the Russia-Ukraine war, and a growing conflict in the Middle East. Supply chain disruptions have been frequent, and western countries, particularly the US, have lurched towards protectionism. Trade policy is now guided, more, by geopolitical and security considerations. Donald Trump’s victory in the recent presidential elections has further sparked uncertainty about the direction of US trade policy — Trump has advocated for a 60 per cent tariff on imports from China, and 10-20 per cent tariff on other imports.
In this fast changing milieu, India must reevaluate its trade policy. While the country has since signed some trade agreements with countries such as the UAE and Australia, progress on others, such as the agreements with the EU and UK, has been slow. Subrahmanyam’s comments, which perhaps indicate some rethink within the government, are also at odds with arguments being made for looking at agreements such as the ones with ASEAN in light of a growing trade deficit. As India navigates a rapidly evolving geopolitical environment with a second Trump presidency set to unfold, Subrahmanyam’s views call for a wider debate.
© The Indian Express Pvt Ltd
First uploaded on: 12-11-2024 at 04:00 IST
