BackIndia should go all out in its Westward trade push
Mutually assured flexibility on tariff concessions would help India and its Western partners score economic gains and also counterbalance China’s growing dominance of world trade
PremiumThis week has seen some welcome action on the trade front, with India adopting a roadmap for the rest of this decade to elevate ties with the UK and also moving to revive free-trade talks with the EU. An India-UK plan unveiled on Tuesday will raise our bilateral relationship to a ‘comprehensive strategic partnership’, aimed at greater engagement in such areas as economic affairs, defence and health. The two countries signed a £1-billion trade investment pact that is expected to generate jobs in both. Separately, India and the EU are reportedly working out how to resume stalled negotiations for a trade deal, after Prime Minister Narendra Modi spoke to EU chief executive Ursula von der Leyen on Monday. These developments indicate our Westward turn to forge trade agreements after we withdrew from the Asia-centric Regional Comprehensive Economic Partnership (RCEP), seen in New Delhi as yet another Chinese play for regional domination. Our rejection of RCEP, which covers much of the eastern hemisphere, had exposed us to the risk of losing out on cross-border commercial relations in a highly dynamic part of the world. To compensate for the opportunity cost of that decision, it was imperative to strike other alliances. With a big export thrust held up as a major aspect of Modi’s emphasis on self-reliance, the West beckoned. While the East is emerging as a huge market, the US, UK and EU offer much potential for trade expansion.
Of course, trade is always a two-way enterprise. The signing of pacts would involve mutual tariff reductions and the lowering of other barriers, both of which have proven thorny so far. In general, while the West wants us to lower import duties, which the Centre has slowly been raising for the past half decade or so, our negotiators have been citing India’s sovereign right to protect domestic businesses under World Trade Organization rules. Globally, even before covid knocked the wind out of the sails of cargo ships, commerce across borders had been doing badly under the extended effects of a financial crisis that shook things up in 2008-09. But world trade remains a reliable path to global prosperity and must therefore regain its gusto. For us, deal-making would mean opening up markets to imports in lieu of easier access to foreign ones.
Concessions that cause very few job losses in India can easily be made. The UK, for instance, wants us to slash our high tariffs on Scotch whisky. The EU complains of our import levies on its drinks, food items and vehicles. The US also has a list of products it wants us to allow in without charging duties that price them out of reach. In acceding to some of these demands, we could bargain for better export terms on goods that we make competitively, or expect to once a new incentive scheme for manufacturers shows results. Of course, a broad cost-benefit analysis will have to guide our approach to talks, especially since there are other complexities involved; US visa rules, for example, affect our software exports. Since it is governments that thrash out deals, geopolitical convergences are often sought too. We seem to be in a favourable position on this, given the West’s need to keep China’s rise in check. The UK’s Rolls-Royce has just inked a memorandum with Hindustan Aeronautics Ltd for warship engines, a sign of our strategic ties. Technology could come our way from the US, too. If we can leverage an ability to play a role in Asia’s balance of power to our economic benefit, we should.
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