Talk shop at Boao Forum

Talk shop at Boao Forum

Ahead of the Boao Forum for Asia, the Chinese equivalent of the World Economic Forum (WEF), slated for 8-11 April, India and China have a real possibility to ramp up not just bilateral ties, but also seize the opportunity to claim regional, and even global, leadership on a multitude of topical issues of global concern. At a time when multilateral institutions such as WTO are feared to be losing significance, the Boao Forum gathers importance as a platform to reinforce the commitment towards free, rule-based trading. The United States has been pulling the plug on free trade, having imposed unprecedented tariffs on US imports of steel and aluminium, risking backlash and an eventual trade war. The steel tariffs are looked at as a violation of WTO rules. China has already taken retaliatory action by announcing 25% additional tariffs on US goods covering 106 items as a response to the US imposition of additional tariffs up on 1,300 goods imported from China, worth $50 billion.

Meanwhile, the Trans Pacific Partnership, which was thought to be a challenge to the WTO trade order, has gone ahead without America's participation. The TPP was feared to be rehashing the rules of global trade through treaties on investment. The members of the TPP, led by Japan, went ahead and signed the CATPP (Comprehensive Agreement on Trans Pacific Partnership) on March 8 in Chile. It also goes to show that countries will continue to do what suits their interests best and it's a only a matter of time before the US begins to feel isolated on the global trade front. Overall, the US seems to have receded from the global leadership position on pretty much all matters of worldwide significance. This includes pulling out of the Paris Agreement, which is an important global treaty to tackle climate change.

All of this presents at least a signalling opportunity for China and India to declare intent to fill  the void in global leadership. Together with the BRICS and the Bangladesh-China-India-Myanmar (BCIM) Forum, and similar institutional arrangements elsewhere, China and India can work together for a multilateral Asian and global order while also improving bilateral ties. All of this also presents India an opportunity to lead in diffusing the possibility of a global trade war, even though New Delhi is unlikely to be affected by the surge in tariffs on steel and aluminium. However, India is on the watch list of the US given that India has a trade surplus with the US.

The Indian government is also slated to finalise a position on the Regional Comprehensive Economic Partnership (RCEP) free trade area talks soon, and it is an opportune moment for India and China to work together to iron out differences on tariffs, non-tariff barriers, and other sticking points, in order to shape a mutually beneficial regional trade agreement, which can set the stage for restoration of multilateral trading regimes. The RCEP is going to be the largest trade bloc in the world and has the potential to shape global rules of trade.

Under the auspices of 'Make in India', improved ease of doing business, labour market flexibility and macroeconomic stability, FDI is expected to pick up in India, including Chinese FDI. While China is the largest trading partner for India, the two countries also have outstanding trade related concerns to iron out. India and China signed 101 agreements under trade cooperation projects when Chinese commerce and industry representatives came visiting to strengthen economic ties. Trade between the two countries jumped by about 20% in 2017, reaching $84.45 billion. However, India's high trade deficit with China, which was $51.08 billion in 2016-17, is a cause of worry for the commerce ministry back home.

Resolution of market access issues and other non-tariff barriers between the two countries is a priority as far as commercial relations are concerned. India has, in fact, initiated 223 anti-dumping investigations between 2012 and 2017 (until July) and China tops the list, with 62 such cases against it. It is worth noting that in 2017, China's imports from India soared by 40% while overall trade grew at 20%. This is a good context for India to deepen the case for a balanced trade scenario as India continues to grapple with the problem of influx of Chinese imports affecting its domestic manufacturing industry.

Besides beefing up domestic capacities, market access issues are among major reasons why India has been unable to ramp up its value-added exports to China.

At present, most of its exports are raw materials, while Chinese exports to India comprise of high value-added goods, including electronics and consumer goods.

Pharmaceuticals, for instance, is one key sector, in which India has not been able to tap the Chinese market, despite doing well in EU and America. While the same has to be taken up at the highest levels, the Boao Forum may be an ideal platform to begin informal talks while coming out with a generalised statement in support of free trade, to set the stage for a cooperative way forward.

In sum, China and India will need to step up communication and position coordination, continue to send positive signals to the outside world in support of the multilateral trading system and jointly defend the interests of developing members. Following the retreat of simmering tensions surrounding the Doklam standoff, China and India represent the possibility of a strong, practical bilateral relationship, with implications for the global economy. The Boao Forum provides an opportunity to usher in the post-Doklam phase of India-China ties.

(The writers are professors at the Institute of Economic Growth, Delhi University Enclave, Delhi)

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