Home / Opinion / Columns /  Trade deals with India to the rescue of political careers

In many capitals across the world, leaders are adopting a new formula for re-election: get on the phone with Indian Prime Minister Narendra Modi (or, better still, fly down to India), talk down Ukraine, sign a trade deal (even an interim one will do). Three examples of this model stand out: Leaders from Australia, the UK and the EU (European Commission President Ursula von der Leyen is in India from 24 April onwards) are all looking to India sojourns for providing partial solutions to their domestic problems. Even Mauritius President Pravind Jugnauth, currently visiting India, seems to be hoping that his tour will help mute rising opposition back home.

India’s non-committal stand in the Russia-Ukraine conflict has upset a working geo-political equilibrium, igniting apprehensions in the global community about India tacking a course closer to China, through the Sino-Russia partnership, despite past points of concern. Since there are no permanent friends or enemies, perhaps the greater geo-political risk is not India sliding back into Russia’s arms but re-entering China’s sphere of influence. This probably explains why global leaders are rushing to sign quick trade or business deals, even if these are incomplete or ad hoc; this, seemingly, is an attempt to commit India to a closer trade relationship with Western economies and maybe pre-empt the strengthening of a Sino-Russian axis. There are two other collateral benefits: it not only helps hedge the Western economic bloc’s China presence (China-Plus-One strategy in wonk-speak), but also invests their leaders with bragging rights back home.

This flux in the global power calculus undoubtedly presents India with a unique bargaining position. A lot will, however, depend on what India extracts from this global urgency to sign trade deals: only noise and photo-ops or hard-nosed deals that actually boost India’s economic growth.

A starting point could be the India-Australia Economic Cooperation and Trade Agreement (ECTA). The trade pact is a promising development for India-Australia ties and was concluded at an accelerated pace after intervention by leaders of the two nations. It is ambitious and has the potential to grow trade between the two nations by 25% right away. Amitabh Mattoo, professor at Jawaharlal Nehru University, commented in an op-ed: “The ECTA represents…a significant turning point in India’s foreign policy – both in terms of geo-strategy as well as geo-economics." India’s commerce minister Piyush Goyal and Australia’s trade minister Dan Tehan commented in another jointly signed op-ed: “This historic deal will eliminate tariffs on more than 85% of Australian goods entering India and almost all Indian goods entering Australia upon entry into force."

The operative part “entry into force" is where trade meets politics. Australia will need its parliament’s assent before the deal can become reality. But Prime Minister Scott Morrison, whose personal intervention and coordination with Modi made the agreement a possibility, has called for fresh general elections there, due now on 21 May. The Australian parliament was officially dissolved on 11 April, thereby relegating the ECTA to a kind of limbo zone. Two paths diverge here: if Morrison is re-elected, there will be no problem. But if Morrison is not re-elected—early polls showed his Labour opponent slightly ahead of him—the Australian parliament may choose to renegotiate the interim agreement. Even assuming that the new Australian prime minister sticks to his predecessor’s bilateral agreements, it is quite likely that there will be domestic pressure to take the ECTA to its logical conclusion.

The original ambition was for the two nations to complete a Comprehensive Economic Cooperation Agreement, which is far wider in scope, hugely ambitious and would include, among other things, digital trade, agriculture and government procurement.

Interestingly, both governments have decided to set up a negotiating team to resume CECA negotiations, 75 days after ECTA is signed. There is however no clarity if these talks would be subject to the ECTA’s ratification.

British Prime Minister Boris Johnson also made a dash for India in the midst of growing clamour in Westminster for his resignation and speculation that he may be forced to call early elections. Compared with the bold ECTA, or even a touchy-feely Comprehensive Economic Partnership Agreement signed recently with the United Arab Emirates, Boris Johnson’s visit was mostly high on rhetoric and promises. Both Johnson and Modi have agreed to accelerate talks to conclude a free trade agreement by the end of the year, thereby kicking the proverbial can down the road. It is thus questionable whether Johnson will have anything tangible to show when he gets back home that can help him save his premiership.

Bernd Lange, chairman of the European Union Parliament Committee on International Trade, was in India recently to discuss how the long-pending trade agreement with India could be signed before the 2024 round of elections to the European Parliament. Lange’s trip is being backed up with a visit by Ursula von der Leyen who, among other things, is also expected to discuss the long-pending trade deal. The EU’s stake in India is critical: it is among India’s largest investors, with over 4,500 European companies operating in the country.

At a time when the geo-political deck has been reshuffled, a trade pact with India seems to have become a trump card.

Rajrishi Singhal is a policy consultant, journalist and author. His Twitter handle is @rajrishisinghal.

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