It appears Indian economics, too, is getting radicalised. Aside from shady efforts to isolate Pakistan under FATF, India is furious at China also. India tried to boycott import of Cheap Chinese electronic goods, particularly transistors/chips. Through aid injections, it weaned away some SAARC countries from attending scheduled conference in Pakistan. India’s developmental assistance to six neighbouring countries in South Asia over the last four fiscal years amounted to over Rs 211 billion. The countries are Afghanistan, Bangladesh, Bhutan, Maldives, Nepal and Sri Lanka.
India’s politically-stringed aid
India extended developmental assistance to six neighbouring countries. The total aid to Afghanistan from 2014-15 to 2017-18 was Rs 22.32 billion, to Bangladesh it was Rs 5.14 billion, and to Bhutan it was Rs 156.8 billion. The developmental assistance to Maldives during the same period was Rs 2.7 billion, to Nepal it was Rs 13.22 billion, and to Sri Lanka it was Rs 10.8 billion. India has built a dam in Afghanistan and making 11 more there. She has committed Rs 45 billion for Bhutan’s 11th Plan – about 68 per cent of the total external assistance received. Another Rs 5 billion came in from India as part of the economic stimulus plan.
Modi visited only such countries that as could promise to isolate Pakistan. Between 2014 and 2018, over Rs 2,021 crore was spent on chartered flights, maintenance of aircraft and hotline facilities during Prime Minister Narendra Modi’s visits to top 10 countries from where India has received the maximum foreign-domestic investment inflows. Foreign Direct Investments grew from US$ 30,930.5 million in 2014, to US$ 43478.27 million in 2017. A total of Rs 1,583.18 crore was spent on maintenance of Modi’s aircraft and Rs 429.25 crore on chartered flights during the period between June 15, 2014 and December 3, 2018. The total expenditure on hotline was Rs 9.11 crore. Modi visited over 55 countries in 48 foreign trips since taking over as prime minister in May 2014. Over Rs 1,346 crore was incurred on chartered flights, maintenance of aircraft and hotline facilities during Manmohan Singh’s foreign visits from 2009-10 till 2013-14 during UPA-II.
The trading community also stands saffronised. The Confederation of All India Traders announced, “The time has come when China should suffer due to its proximity with Pakistan. The Confederation represents 70 million traders. It burnt Chinese goods on March 19 to “teach a lesson” to China. In a statement, the Confederation said. “It has launched a national campaign to boycott Chinese goods among the trading community of the country, calling the traders not to sell or buy Chinese goods.”
Chinese Xiaomi-Inc mobile phones and toys are ubiquitous in India. Trade between the countries grew to nearly $90 billion in the year ending March 2018.
Ashwani Mahajan, a leader of the Swadeshi Jagran Manch, also, called for a boycott of Chinese goods. He also wrote to Prime Minister Narendra Modi recommending that India should slap higher tariffs on Beijing. The Manch is the economic wing of the Rashtriya Swayamsevak Sangh, a Hindu nationalist group with close ties to the ruling Bharatiya Janata Party. Yoga guru Baba Ramdev also called for a ban on Chinese goods in the country.
The bilateral trade will cross the US$ 100 billion mark this year. However, this figure includes a deficit of US$ 58 billion for India and it has been increasing over the years. India’s bilateral trade deficit with China plus Hong Kong is about a third of its total trade deficit with all countries put together. Trade deficit with China came down by US$10 billion in the fiscal year ended March 2019 to $58 billion (in over US$ 80 billion trade). Decrease is illusory.
China has begun to ship some of its products through Hong Kong rather than its domestic ports. The combined Indian trade deficit with China plus Hong Kong has not reduced. India’s bilateral trade deficit with China plus Hong Kong is about a third of its total trade deficit with all countries put together. That with China alone is around a quarter of the total trade deficit.
The International Monetary Fund (IMF) has taken a closer look at the problem of bilateral trade imbalances in its latest World Economic Outlook, based on a study of 63 countries over 20 years.
First, while basic macroeconomic accounting tells us that China runs a huge trade surplus because it saves more than it invests, it has also been strongly interventionist in the way it has managed its exchange rate. Its sustained currency manipulation is reflected in its $3 trillion foreign exchange reserves. Besides, China uses subsidies to promote its domestic industry, giving it an unfair advantage in many areas. India fears bilateral trade deficit has become part of a larger geostrategic dilemma.
This is especially true of specific items such as consumer electronics, telecom equipment and power equipment. India ignores its uncompetitive goods in global market.
Aside from gung-ho, India’s trade ministry said in an email the country can’t take any unilateral punitive action against a fellow member of the World Trade Organisation. India could not boycott import of China-made transistors that accounted for 81.9 percent of India’s transistor imports in 2017. The transistors are an input to almost all Indian electronic goods and machinery. India cannot afford to switch to home-made expensive alternative. These imports also contain embodied technologies, particularly semiconductors, fertilizer and pharmaceutical.
Despite political differences, the world is cooperating on economic issues. It is India’s own interest not to subordinate economics to political expediency.
Retaliatory tariffs are unlikely to `soften’ China. Indian consumers may still not buy Indian goods. They may prefer to goods from countries other than China. Besides, China may route its products through other countries like Hong Kong. The solution lies in making Indian goods cost-effective substitutes against Chinese goods.
Rising wages in China are making Chinese goods more expensive. But, it is Vietnam, Indonesia, Bangladesh, Malaysia and the Philippines, not India, that are taking advantage of it. India needs to
Create niched in global markets and supply chains. Foxconn Technology Co. Ltd will begin mass-producing Apple iPhones at its factory outside Chennai this year. The Taiwanese company also makes phones for Xiaomi and Nokia in India. Such industrial projects should serve conveyor belts for India’s entry into international markets.
Trump’s wavering support
Both Trump and Modi hoped to isolate thorny trade issues from their geopolitical ties as both countries positioned themselves in Asia against an increasingly assertive China. The USA has conjured up an anti-China strategic alliance — which includes the so-called Quadrilateral Security Dialogue between the US, India, Japan and Australia. Even assuming it to be intact, it appears India and the USA appears to be headed for a bout of turbulence.
The Trump administration notified Congress (March 6, 2019) that it wants to scrap trade concessions for India, the largest beneficiary of the so-called generalised system of preferences that impacts $5.7 billion worth of goods. The move is symbolic. It affects just a fraction of India’s trade flows. But it is significant as it is in sync with India’s ennui towards China in view of her `hold’ on declaring a Pakistani religious leader `terrorist’.
The USA is finding it hard to maintain trade restrictions, for instance on Turkey, while treating India as a protégé. The USA cannot keep up unequal trade practices for long. US pulled out of Trans-Pacific Partnership trade deal that would have more closely tied Asian economies to Washington, despite pleas from regional allies such as Japan. Trump can’t remain unruffled by Indian customs duty hikes, expanded import substitution rules and domestic price caps.
Oil- import waiver
Washington policy makers are uneasy with India, with a history of non-alignment. Around May 2019, Washington may withdraw waiver to India on oil imports from Iran, and press for increased oil, natural gas and coal imports from the US. India says it is prepared to meet scrapping of preferential US trade concessions. Oil crunch would pinch, but India does not like to be seen buckling to American pressure.
India’s anachronistic saffronomics detrimental to her economic future
China’s role under World Trade Organisation and in BRIC (Brazil, Russia, India and China) would force India to shun its spurious repugnance to BRI. In 1990, BRIC countries accounted for 11% of global gross domestic product (GDP), by 2014 nearly 30%. These countries are not a political alliance, like the European Union or a formal trading association. Yet they have power as an economic bloc.
By 2050 (with China as a sole hegemon), these economies, including India, would be wealthier than most of the current major economic powers. Columbia University established the BRICLab, where students examine foreign, domestic, and financial policies of BRIC members. China and India are destined to become the world’s dominant suppliers of manufactured goods and services by 2050.
Brazil and Russia will become dominant suppliers of raw materials. BRIC expanded to include South Africa as the fifth nation in 2010.
RCEP, being negotiated between India, China, the 10-member ASEAN, Japan, South Korea, Australia and New Zealand, may result in the largest free trade bloc in the world covering about 3.5 billion people and 30 per cent of the world’s Gross Domestic Product. Apart from producer goods, the areas being negotiated include services, investments, intellectual property and government procurement.
China wants India to give concessions it has given the ASEAN countries. India has refused to do so as it is eliminating duties on more than 80 per cent items with ASEAN under a free-trade agreement. India ostensibly wants to protect domestic industry against competition from cheap Chinese goods.
India should not let narrow political interests smother broader economic interests. It should welcome Chinese investment in energy security, and infrastructure, such as roads and railways, industrial parks and in the food processing sector. To attract Chinese tourists, India should expand its hospitality sector please Chinese palate. In 2018, the total number of travellers from China to India and vice versa added up to just one million. India could attract more Chinese visitors by alluring them with promise of an unparalleled mélange of heritage, adventure, wellness, medical and spiritual well-being.
Role of WTO in Regularization of International Trade
International trade is one of the main features of the globalized world and global economy. There it needs also a well-organized institutional mechanism to regulate it. World Trade Organization is an international organization established in 1995, whose main objective is to facilitate trade relations among its member countries for their mutual benefits. Currently 164 states are its members. The activities and works of WTO are performing by a Secretariate of about 700 staff located in Geneva, Switzerland, led by the Director General. English, Spanish and French are the official languages of World Trade Organization. The annual budget of WTO is about 180 million dollars.
Since its creation it is playing an important role in the regularization of international trade. It offers a forum and facilitation for negotiating trade agreements in order to reduce the barriers in the way of smooth international trade among member countries. Thus, the role of this organization is playing very important role in the regularization of international trade which is contributing to economic development and growth of member countries in this globalized world. The World Trade Organization also offers an institutional structure and legal framework for the execution and supervising of the international trade related agreements which are very helpful in regularization of international trade. It also settles disputes, disagreements and conflicts occurring during the interpretation and execution of the components of the international agreements related to international trade. During the past 60 years, the World Trade Organization and its predecessor organization the GATT (General Agreement on Tariffs and Trade) have assisted to establish a solid and flourishing global trade system, by this means helping to extraordinary international economic development.
The WTO is regularizing international trade more specifically through negotiating the decrease and finally elimination of barriers to trade among countries and try to make smoothly the working of the rules and principles governing the international trade e.g. tariffs, subsidies, product standards, and antidumping etc. It also administers and monitor the execution of the World Trade Organization’s determined guidelines for trade in services, goods as well as intellectual property rights related to international trade. It also monitors and review the member states international trade policies as well as make sure the transparency in bilateral and multilateral trade agreements. Likewise, it also solves disputes arising among members related to trade relations or related to the explanation of the provisions of the trade agreements. It also offers services to the governments of the developing states in the fields of capacity building of officers in matters related to international trade. WTO is also doing research on matters related to international trade and its related issues and collect data in order to find better solutions of the problems and obstacles in regularization of international trade. It is also trying to bring into the organization the 29 states who are yet not members of the organization aimed to assist and regulate their international trade according to the international standard.
One of the main barriers in way to international trade is disputes between the engaged parties. Since long this was a very critical issue limiting the trade among states. The WTO is playing very good and instrumental role in the solution of trade related disputes. Since the establishment of WTO in 1995 over 400 disputes related to trade have been brought by its member countries to WTO. The increasing number of bringing trade related disputes to WTO is showing the faith of member countries in the organization. Close trade relations have massive advantages but also create disputes and disagreements. With the increase of international trade, the possibility of its related disputes also increases. Previously, such problems and disagreements have caused in severe disputes. But at present, in the era of WTO the international trade related disputes are decreased because the member states have now dispute’s solution platform, and they are turning to the World Trade Organization to solve their trade related disagreements and disputes. Before the World War Second, there was not any such international organization or forum which could facilitate international trade and its related affairs, and there was also noany legal framework for solving trade related disputes among states of the word.
One of The World Trade Organization’s guiding principal is to continue the open boundaries for trade, ensure the Most Favoured Nation (MFN) status among member countries and stop discriminatory behaviour of members towards other member(s) and bring transparency in doing international trade. It is also assisting counties to open their indigenous markets to global trade, with justified exemptions or with suitable flexibilities, promote and support to durable growth, reduce trade deficit, decrease poverty, and promote economic stability. It is also working to integrate different international trade policies and principles. The member countries of WTO are also under the compulsion to bring their trade related disputes to this organization and avoid unilateral actions. WTO is the central pillar of the current international trade system.
Russia and France to strengthen economic cooperation
On April 29, Russian President Vladimir Putin held videoconference with leaders of several French companies-members of the Franco-Russian Chamber of Commerce and Industry (CCI France-Russia) to discuss some aspects of Russian-French trade, economic and investment cooperation, including the implementation of large joint projects as well as the prospects for collaborative work.
Putin noted that the Economic Council of the Franco-Russian Chamber of Commerce and Industry is still operational in spite of difficulties, and the late April meeting was the fourth time since 2016. From the historical records, France has been and remains a key economic partner for Russia, holding a high but not sufficiently high, 6th place among EU countries in the amount of accumulated investment in the Russian economy and 5th place in the volume of trade.
Despite a certain decline in mutual trade in 2020 (it went down by 14 percent compared to 2019) the ultimate figure is quite acceptable at $13 billion. French investment in Russia is hovering around $17 billion, while Russian investment in France is $3 billion.
Over 500 companies with French capital are operating in various sectors of the Russian economy. French business features especially prominently in the Russian fuel and energy complex, automobile manufacturing and, of course, the food industry. “It could have been more if the French regulatory and state authorities treated Russian businesses as Russia is treating French businesses. We appreciate that in a difficult economic environment, French companies operating in Russia have not reduced their activity,” Putin pointed out.
The Russian Government established the Foreign Investment Advisory Council, which includes six French companies. Further, there is an opportunity to discuss specific issues related to the economic and investment climate in Russia, and that opportunity is traditionally provided at the St Petersburg International Economic Forum, which will be held on June 2-5.
French companies are involved in the implementation of globally famous landmark projects, such as the construction of the Yamal LNG and Arctic LNG 2 facilities and the Nord Stream 2 gas pipeline project. This, Putin regrettably said “We are aware of and regret the amount of political speculation concerning the latter. I would like to point out once again that it is a purely economic project, it has nothing to do with present-day political considerations.”
Russia intends to increase assistance to the development of science and technology. Funds will be directed primarily to innovation sectors such as pharmaceuticals and biotechnology, nuclear and renewable energy, and the utilisation of carbon emissions.
“We are interested in involving foreign companies that would like to invest in Russia and in projects we consider high priority. In order to do this, we will continue to use preferential investment regimes and execute special investment contracts, as you know. A lot of French companies successfully use these tools on the Russian market. For example, more than one third of 45 special investment contracts have been signed with European, including French, partners,” he explained during the meeting.
He also mentioned continuous efforts to attract foreign companies to localise their production to state purchases and to implementing the National Development Projects, as well as existing opportunities for French businesses in special economic zones. Today there are 38 such zones created throughout the Russian Federation.
Russia pays particular attention to attracting high-quality foreign specialists. Their employment is being fast-tracked, and their families can now obtain indefinite residence permits. There is a plan to launch a special programme of ‘golden visas’ whereby to issue a residence permit in exchange for investment in the real economy, a practice is used in many other countries.
Taking his turn, Co-Chair of the CCI France-Russian Economic Council, Gennady Timchenko, noted that the pandemic has changed the world, people and business, and that French companies in Russia are responsible employers and socially responsible members of Russian society.
Despite the crisis and the geopolitical situation, a number of French companies have launched production in 2020–2021. Companies such as Saint-Gobain and Danone have renewed their investments. French companies have increased their export of products manufactured in Russia; they are investing in priority sectors of the Russian economy. For example, this year the French company Lidea is launching a plant called Tanais to produce seeds. Russia is dependent on the import of 30 to 60 percent of these seeds, according to various estimates.
Despite the current geopolitical conditions and information field, there are important signals for French business and the Russian side to strengthen economic cooperation, attract investment, and create partnerships on a new mutually beneficial basis.
Co-Chair of the CCI France-Russian Economic Council, Patrick Pouyanne, noted that the meeting has become an excellent tradition, the presence of 17 CEOs and deputy CEOs of French companies shows the importance of these joint meetings, and further reflect the deep interest of French business in Russia.
In addition, Patrick Pouyanne further offered some insights into Russia-French cooperation. By 2020, twenty members of the Economic Council invested a total of 1.65 trillion rubles, supporting 170,000 jobs. These companies have operated in Russia for decades and continue investing in the Russian economy despite the sanctions and the epidemic. These companies help France maintain its status as the second largest investor in Russia. In 2020, France invested over $1 billion in Russia despite the economic difficulties caused by the pandemic.
Concluding his remarks, Patrick Pouyanne stressed that the economic operators believe everyone will benefit if Russia, France and all of Europe are not divided or isolated. This is the challenge today. Indeed, diplomacy has to continue playing an important role in settling differences, and businesses are convinced that meetings like this create bridges between Russia and France to strengthen investment and economic cooperation.
Iran’s Economic Diplomacy through CPEC
U.S. sanctions against Iran are characterized by strategic flexibility and adaptability. They are designed to have maximum negative and deterrent effect on Iran’s military, economic and diplomatic growth. Tehran is exploring ways to counter these sanctions most probably by economic engagements with the regional countries. Iran’s perception of CPEC lends some credit to this argument.
Since the initiation of CPEC, the regional perception has already started to change as many countries have begun to see the project within the domain of their national interests. Iran has expressed its long-standing interests to join the CPEC viewing the corridor as a cornerstone for the country economic prosperity and regional connectivity.
Iran solely focuses more on the economic aspect of CPEC. Regional connectivity through CPEC can boost Iran’s stake in the global output. In 2015, on the sidelines of the United Nation General Assembly (UNGA) address, Iran’s President Hassan Rouhani expressed a desire to be the part of CPEC. He emphasized the importance of connectivity projects for the region. Iran’s initial reluctance to CPEC was transformative in nature and heavily came down with the unfolding of new geoeconomic realities.
Iran’s inclination for the CPEC project even becomes the part of official discourse. Iran’s ambassador to Pakistan Mehdi Monardost showed keen interest to participate in the CPEC and named it as one of the greatest projects in the history of the region. He envisioned a great boost to bilateral trade between Pakistan and Iran under the framework of this regional connectivity corridor. In 2017, Iran’s economy minister Ali Tayyebnia participated in the New Silk Road summit. He praised the New Silk Road concept for regional connectivity.
Iran’s economy is already clutched due to the international sanctions invoked by the Trump administration after pulling back from the Iranian Nuclear Agreement formally known as the Joint Comprehensive Plan of Action (JCPOA) in May 2018.Downplaying the perception of geopolitical competition between Gwadar and Chabahar, Iran higher officials negated the impression of competition falsely exaggerated by International and India media and insisted on the complementary nature of two ports.
In 2016,Iran and India signed an agreement for the development of Chabahar port and it was view as the counterweight to Gwadar port. Without explicitly mentioning India by name, Iran’s ambassador to Pakistan Syed Mohammad Ali Hoseeni defended the decision of his country to drop out India from the project in Chabahar by stating “when some foreign governments found reluctant in their relations with Iran and need other’s permission for even their normal interactions, for sure they would not be capable of planning and implementing such long-term cooperation contracts”.
The same rhetoric appears in the views of Chinese leadership. Brushing aside the allegations of Iran’s perceived resistance to CPEC and Gwadar port, Iran’s foreign minister Jawad Zarif dismissed the allegations and supported growth and development anywhere in Pakistan.
Chabahar is often seen as a rival to Gwadar port. However, Indian discourse has got an altogether different lease of life in the media compared to the Iranian one. Iran’s ambassador to Pakistan Mehdi honardoost utterly disregarded the narrative of competition of two ports. He invited both Pakistan and China to closely work in Chabahar port.
China considers Iran as an important country for its energy security, BRI and in the larger context of global competition with USA. China dual role both in Gwadar and Chabahar, according to the analysts, will likely reduce the impression of competition between two ports. Chinese stance on the Chabahar port also complement the Iran’s position on Chabahar. Chinese premier Le Keqiang rejected the notion that Chabahar port is in competition with the Gwadar. He is convinced with the idea that both ports have the potential to complement each other.
Tehran global status goes upward with the emerging financial and diplomatic backing of China. Beijing openly backs Tehran in the face of U.S. might. On March 26, 2021, China and Iran signed an agreement expressing a desire to increase cooperation and trade relations over the next 25 years. Wang Yi, Chinese foreign minister, said that USA should rescind the sanctions against Iran. The 25 years deal is considered as part of the Belt and Road Initiative (BRI). According to Tehran Times analysts Peyman Hassani and Ammar Hossein Arabpour, this deal is considered a relief to Iran’s gas and oil sector against USA sanctions.
USA sanctions forcefully bar the countries from purchasing oil from Iran. The US Department of Defense’s report notes that China Pakistan Economic Corridor (CPEC) focus on pipelines and port construction. Pakistan’s reluctance to follow the Iran-Pakistan gas pipeline which is stalled due to American pressure can be reviewed, too much sigh of relief for Tehran’s energy export.
Triangular relations of China, Pakistan and Iran will likely put Iran on the strong footing. Richard Caplan, a professor of international relations at the university of Oxford, notes, “The agreement which predates Biden, undercuts U.S. efforts to isolate Iran economically and, to some extent, diplomatically.
Diplomatic and economic isolation remain at the center of Iran’s foreign policy under the severe U.S. sanctions. Iran’s perceptions of CPEC revolves around the same fact that through regional engagements under CPEC and BRI, it can tackle its global problems to some extent.
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