Page 2 of
2 A giant trade partnership of
unequals By Pallavi Aiyar
economic issues at the highest
level would help put flesh on the bare bones of
this partnership, giving the two countries a
mechanism through which to manage nascent tensions
in what has the potential to become one of the
world’s most important economic engagements.
It may be argued that setting up such a
dialogue is premature. Indeed, even though China
is set to emerge as India’s largest trading
partner, in 2006 India was only the 18th largest
exporter to
China and the 13th most
significant export destination of Chinese
products. Compared to the India-China bilateral
trade of $25 billion plus, Sino-US trade stands at
well over $200 billion and in fact China’s trade
with a single American company, Wal-Mart, was
worth a staggering $18 billion last year.
Patently, for China at least, India is
still a second-level player when it comes to
trade. Longer-term commitments are even less
impressive. Actual Indian investment in China
until March 2007 stood at a mere $178 million
(although contractual investment is valued higher,
at $565). By contrast, by the end of 2005, US
businesses had actually invested $51.1 billion in
China and set up 49,000 enterprises in the
country.
Chinese investments in India are
also less than weighty. According to the Indian
government, FDI inflows to India from China
between August 1991 and December 2006 worked out
to a grand total of $3.61 million. Chinese
statistics put the figure considerably higher at
about $17 million for actual investments, but even
this number is distinctly unimposing.
However, it is precisely because the
bilateral economic relationship has still to reach
maturity that the time is right for the initiation
of a strategic level dialogue. It would be more
useful to develop such a mechanism proactively
before budding frictions have expanded into
serious roadblocks rather than retroactively after
the problem already has the two countries set on a
collision course.
Currently India and
China have a ministerial-level Joint Economic
Group (JEG) that is supposed to meet every two
years to discuss bilateral issues of an economic
nature. The JEG last met in 2006 after a gap of
six years. In addition, a number of sector
specific joint working groups on trade, energy,
coal, agriculture and so on exist. These dialogue
mechanisms however remain sporadic and scattered,
reducing their impact and efficacy.
An
India-China strategic economic dialogue along the
lines of the Sino-US one would bring the diverse
facets of bilateral trade and investment under one
umbrella. Upgrading the level of the dialogue and
increasing its frequency would moreover signal the
determination to keep what has been a positive in
the bilateral relationship, economic ties, as a
positive going ahead as well.
India’s
growing deficit with its northern neighbor is
already leading to an edginess in some quarters.
Thus for example industry organizations like CII
and FICCI are expressing increasing reservations
at the ongoing negotiations for a bilateral RTA
(regional trade agreement). A high-level dialogue
would help to channel and contain this edginess in
addition to providing a forum for both countries
to press for policy directives that would be in
their national interest.
The Indian
embassy in Beijing for example has identified
certain sectors and products it believes to have
strong potential for growth in exports to China,
including processed food products, edible fruits,
dairy products and precious jewelry.
Moreover, the embassy believes the two
countries to have comparative advantages within
certain sectors in which overall the two might be
competitors. These include chemicals, machinery
and equipment and textiles. The idea according to
ambassador Rao is "to convert competition into new
opportunities for cooperation through
intra-industrial trade in niche areas".
However, as things stand, there are scant
channels available for pushing the Indian agenda
forward with the Chinese government. Although CII
and FICCI have representative offices in China,
Indian industry lacks a Chamber of Commerce that
could potentially lobby on its behalf. By point of
comparison the American Chamber of Commerce in
China comprises a membership of more than 2,100
individuals from more than 900 companies.
"We [India and China] cannot turn our
backs on each other. This is simply not a feasible
option. But we also cannot be on a collision
course," said Rao. "We must find some way of
creating the space and width on the highway of our
communications," she adds. "After all the business
of diplomacy, today, is business."
Pallavi Aiyar is the China
correspondent for The Hindu.
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