In­dia has an in­dis­pens­able role to play in pro­mot­ing free trade

In­dia must do a bet­ter job of coun­ter­ing false be­liefs about its trad­ing sys­tem that pro­lif­er­ate amongst the global elite.

The Sunday Guardian - - & Comment Analysis -

The global trade sys­tem is en­dur­ing an un­usual amount of strain as a re­sult of the grad­ual ero­sion of the mul­ti­lat­eral trad­ing regime. The with­drawal (or threat­ened with­drawal) of the US from a va­ri­ety of mul­ti­lat­eral agree­ments, in con­junc­tion with the am­bi­tions of China in the Indo-Pa­cific, have be­come a po­lit­i­cal, eco­nomic and se­cu­rity con­cern for a va­ri­ety of key re­gional stake­hold­ers. In this con­text, In­dia has a unique and in­dis­pens­able role to play in pro­mot­ing free trade and en­hanc­ing se­cu­rity through­out Asia and be­yond.

Given that Amer­ica’s re­la­tion­ship with much of Asia will re­main in a state of flux as the Don­ald Trump ad­min­is­tra­tion con­tin­ues to find its foot­ing, In­dia has an op­por­tu­nity to have a greater im­pact on the fu­ture di­rec­tion of its unique re­la­tion­ship with Amer­ica, as well as to fur­ther strengthen its trad­ing po­si­tion vis-à-vis the rest of Asia. One im­por­tant way of pro­tect­ing against fur­ther ero­sion is for In­dia and the US to con­tinue to strengthen their grow­ing bi­lat­eral eco­nomic re­la­tion­ship. The cu­mu­la­tive value of their bi­lat­eral trade in­creased from US$37 bil­lion in 2005 to US$115 bil­lion in 2017, com­men­su­rate with the growth in over­all po­lit­i­cal, eco­nomic, and se­cu­rity ties be­tween the two coun­tries.

That said, some se­ri­ous con­straints could stand in the way of In­dia’s fu­ture growth. The state of In­dia’s in­fra­struc­ture is a prin­ci­pal rea­son why the broader eco­nomic part­ner­ship has not grown even stronger than it has. For ex­am­ple, China, Ja­pan, South Korea, and other Asian economies have more ad­vanced in­fra­struc­ture and manufacturing ca­pa­bil­i­ties, sig­nif­i­cantly en­hanced trade re­la­tions with the US, and are even more glob­ally in­ter­con­nected, de­spite hav­ing had de­vel­op­men­tal his­to­ries that are closer to In­dia’s than to the de­vel­oped West.

In­dia has the abil­ity to make up for lost time by force­fully ad­dress­ing the in­fra­struc­ture is­sue and putting its re­la­tion­ship with the US into hy­per­drive. The coun­try’s in­fra­struc­ture deficits have cost it be­tween 4% and 5% of GDP, se­verely damp­en­ing its abil­ity to im­prove its eco­nomic com­pet­i­tive­ness. Broad reg­u­la­tory is­sues stem­ming from weakly en­forced laws, deeply rooted sys­temic cor­rup­tion, and a men­tal­ity among In­dian bu­reau­crats that is in­com­pat­i­ble with the pur­suit of free trade also greatly con­trib­ute to the con­straints stand­ing in the way of In­dia’s fu­ture growth— all in their own ways be­ing rem­nants of the “so­cial­ist raj”. These deficits span the sec­tors most crit­i­cal to en­hanced trade con­nec­tiv­ity, such as power, in­for­ma­tion tech­nol­ogy and trans­porta­tion. Only when In­dia has shaken off this atavis­tic men­tal­ity can its enor­mous trade po­ten­tial be ac­tu­alised.

An­other rea­son why In­dia’s po­ten­tial has not been re­alised is the de­gree to which its ap­proach to in­tel­lec­tual prop­erty is per­ceived as be­ing out of step. While In­dia has en­shrined a Na­tional In­tel­lec­tual Prop­erty Rights Pol­icy, it has yet to be com­pre­hen­sively im­ple­mented and has left In­dia open to the same sort of trade-re­lated crit­i­cism fre­quently lev­elled against China. Copy­right in­fringe­ment is ram­pant in In­dia at all lev­els due to the weak­ness of en­force­ment mech­a­nisms and grotesque lev­els of cor­rup­tion through­out its bu­reau­cracy.

In­dia must also do a bet­ter job of coun­ter­ing false be­liefs about its trad­ing sys­tem that pro­lif­er­ate amongst the global elite. Contrary to pop­u­lar be­lief, In­dia is not a high tar­iff coun­try. Its av­er­age tar­iff in the last three years ranged be­tween 1.7% and 2.3%, sim­i­lar to the av­er­age tar­iff rates for rel­a­tively open economies. Such mis­con­cep­tions can sig­nif­i­cantly im­pact other coun­tries’ de­sire to trade with New Delhi, which may not con­sider com­menc­ing or grow­ing a trade re­la­tion­ship as a re­sult of such mis­in­for­ma­tion.

While In­dia and the US have much in com­mon— such as demo­cratic po­lit­i­cal frame­works, plu­ral­ist open so­ci­eties, con­sti­tu­tional leg­is­la­tures, and wide­spread use of English—there are also sev­eral sce­nar­ios that could hin­der deeper fu­ture co­op­er­a­tion. The po­ten­tial for con­flict be­tween Prime Min­is­ter Naren­dra Modi’s “Make in In­dia” push ver­sus Pres­i­dent Don­ald Trump’s “Make Amer­ica Great Again” plat­form is a pri­mary area of con­cern. In ad­di­tion, is­sues per­tain­ing to con­stric­tions levied against H-1B visa hold­ers, greater reg­u­la­tion of high tech­nol­ogy trans­fer, and out­sourc­ing are cre­at­ing fric­tion that is ham­per­ing the re­la­tion­ship.

Yet, it is too early to con­clude that the po­ten­tial for con­flict be­tween these two agen­das is lin­ear. The con­tin­ued pros­per­ity of the Amer­i­can econ­omy is de­pen­dent upon un­hin­dered ac­cess to the in­ter­na­tional sup­ply chain, while the manufacturing jobs that PM Modi seeks to grow largely ex­ist in sup­ply chain sec­tors that di­verge from those that are of con­cern to Pres­i­dent Trump. As a re­sult, greater Amer­i­can in­vest­ment in In­dian manufacturing could cre­ate a frame­work for ad­di­tional stream­lin­ing of trade re­stric­tions in or­der to at­tract greater for­eign di­rect in­vest­ment into In­dia.

The bi­lat­eral trade re­la­tion­ship has se­ri­ous geostrate­gic im­pli­ca­tions for the in­ter­na­tional or­der, par­tic­u­larly given In­dia’s crit­i­cal role as a stal­wart against Chi­nese po­lit­i­cal, eco­nomic and mili­tary am­bi­tions. Greater en­gage­ment be­tween the two na­tions in trade is also con­sis­tent with the US goal of sup­port­ing In­dia’s emer­gence as a global power, while serv­ing as coun­ter­weight against China in the Indo-Pa­cific.

Closer trade ties are also con­sis­tent with an even friend­lier de­fence re­la­tion­ship—an ex­ten­sion of fa­cil­i­tat­ing a more open eco­nomic part­ner­ship be­tween the two na­tions. A more seam­less ex­change of so­phis­ti­cated de­fence tech­nol­ogy within the con­text of more open trade reg­u­la­tions would also con­trib­ute to a se­cu­rity frame­work that sup­ports the rules-based in­ter­na­tional or­der, which has con­trib­uted to so much pros­per­ity and sta­bil­ity around the world.

In­dia can­not af­ford to al­low the grad­ual dis­in­te­gra­tion of the global trad­ing regime to hin­der its own pur­suit of a broader free trade frame­work, nor its abil­ity to main­tain a strong re­la­tion­ship with the US, both of which are crit­i­cal to its own fu­ture pros­per­ity and se­cu­rity. It will be in­cum­bent upon In­dia to en­sure that the progress it has made in both ar­eas stays on the right track, while dou­bling down on its core val­ues as a re­spon­si­ble and en­gaged ma­jor power in the re­gion, and the world. Daniel Wag­ner is CEO of Coun­try Risk So­lu­tions and co-au­thor of Global Risk Agility. Aditya Ra­machan­dran is a Re­search As­so­ciate at the Hy­brid Re­al­ity in­sti­tute.

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