A long lens on East Asia

A long lens on East Asia

In the last two years, beginning with a free trade agreement (FTA) with the Association of Southeast Asian Nations (Asean) in 2009, India has accelerated its look East policy. It followed through by inking a Comprehensive Economic Partnership Agreement (CEPA) with South Korea, also in 2009; Japan and Malaysia, in the last few weeks. And, unlike the free trade deal, CEPA includes trade in services—a segment in which India has proven competitive advantage.

The earnestness with which India has pursued its economic linkages in East Asia in particular, coincidentally comes at a time when there is growing insecurity in the region following hegemonic moves undertaken by an increasingly aggressive China. It is tempting to connect the two and read it as part of a grand strategy that leverages strategic advantage to maximize economic opportunity. This may or may not be the case; at the least, it is not an overt strategy that the government espouses.

In any case, the outcome suggests that whatever the underlying intent, the strategy is gaining India an advantage. The arithmetic of India’s trade basket is revealing reason in itself. In 2008-09, a relatively normal year given the recent volatility in global trade, the share of India’s top 10 trading partners accounted for 49.70% of total trade. Further, seven of these trading partners were from Asia, four of whom were from East Asia; these Asian countries accounted for three-quarters of the share of the top 10 trading partners.

Given that the centre of the world is shifting East, a regional focus seems a logical corollary. India, equipped with the rule of law and democratic institutions, offers itself as a good trade partner—especially given its rapidly expanding domestic market. Aggressive Chinese posturing in the neighbourhood has only added to India’s attraction as a destination.

From the sequence of events, it is clear that India has been quick to pounce on the opportunity. It has quickly inked CEPAs as opposed to FTAs. Not only do they provide a more ambitious market access, it also enables India to wriggle out of the stricter confines of the Asean deal which, by its definition of one-size-fits-all so as to be acceptable to all member countries, is far more limited in its purview.

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