India, China reach new trade
heights By Siddharth
Srivastava
NEW DELHI - July 6 will be
remembered as a very important date in Sino-Indian
relations. China and India have agreed on that day
to reopen border trade at the historic Nathu La
Pass after a more than 40-year hiatus. The pass,
which at 4,300 meters is the world's highest
custom house, will open next month and cater to
trade between the small northeastern state of
Sikkim and southern Tibet, with extensions to the
rest of the India and China.
As part of a
political settlement during ongoing border talks,
last year Beijing recognized Sikkim, a former
Buddhist kingdom that now has an elected
government, as Indian territory; in exchange, New
Delhi has stopped making noises about the
human-rights situation in Tibet at international
forums.
The agreement to reopen the
ancient Silk Road route is the latest
sign of
warming relations between the world's two most
populous countries, and underlines the fact that
when diplomatic issues impinge on the bilateral
business relationship, they are more likely to be
ironed out than otherwise. Officials have
acknowledged that a certain amount of undercover
trade occurs at Nathu La, to the tune of perhaps
US$450,000 a year. With trade through the pass
becoming legal, this volume could rise
substantially. The Sikkim government has also been
looking to New Delhi to approve a highway from
Nathu La to western India that could further boost
business.
Trade between India and China
grew to $18.7 billion in 2005, up 37.5% from the
previous year; the figure is expected to cross $20
billion this year. Annual trade between India and
China was just $1 billion not long ago.
Nathu La has been a key passage between
China and India for centuries, and is 460
kilometers from the Tibetan capital Lhasa and
550km from Kolkata, the closest seaport. Traffic
across the Nathu La Pass accounted for 80% of the
total border trade volume between the two
countries in the early years of the 20th century.
For centuries, the Silk Road was one of the most
flourishing trade arteries in the world,
connecting China to India, the Middle East and
Europe. In the 1750s, China and India between them
fashioned 57% of the world's manufacturing output.
The 1962 border war between India and
China led to the closure of the pass until the
modalities of border talks were worked out. India
accuses China of occupying 32,000 square
kilometers of Indian territory in Kashmir, while
Beijing lays claim to the northeastern Indian
state of Arunachal Pradesh. However, both
countries agree that the border disputes should
not derail the immediate imperative to boost
trade.
At present, China and India trade
mainly by sea. Indo-Tibetan imports and exports
are mostly channeled through Tianjin, a port city in
the north an hour or so from Beijing, that involves a
detour of thousands of kilometers. Landlocked
Tibet, one of the poorest parts of China with a
foreign trade of just $200 million, has trailed
far behind China's coastal regions, which have
benefited from huge investments and jobs growth in
trade-linked manufacturing.
The Tibetan
region is thus expected to benefit much from the
resumption of border trade at the Nathu La Pass.
According to China's Xinhua news agency, the vice
chairman of the Tibetan autonomous region, Hao
Peng, said: "If only 10% of the Sino-Indian trade
goes through the pass it means [about] US$1
billion [of trade] a year." Interestingly, the
pass will be opened just a few days after the
first train service starts between eastern China
and Tibet.
Hao said: "The reopening of
border trade will help end economic isolation in
[Tibet] and play a key role in boosting [the]
market economy there. With the new pass, iron ore
and livestock products from India and wool, herbs
and electric appliances from China [can] be
transported over the narrow, mountainous border
road."
Indian Commerce Ministry official
Christy Fernandez was quoted as saying by the
Press Trust of India, "The resumption of border
trade is a great historic event, not only for
enlarging trade, but also for greater relations
between the two countries."
New Delhi
hopes that the pass will lead to a rejuvenation of
eastern India, which is also lagging behind the
rest of its country in terms of economic
development and is infested by Naxalite and Maoist
rebels in the rural areas. The government will
also have to implement major improvements in
transport infrastructure.
Political
contexts Overall, Sino-Indian relations are
at their best since 1962. Indian President A P J
Abdul Kalam recently remarked that the "wound" of
the 1962 conflict with China had "healed" and
India's "national aim" was the coming together of
the two Asian powers. This year was declared one
of India-China friendship, with more than 40
events and meetings to celebrate the occasion.
Following up on Chinese Premier Wen
Jiabao's visit to India last year, both countries
are firming up another round of high-level visits,
with Chinese President Hu Jintao likely to arrive
and Indian Prime Minister Manmohan Singh slated to
visit Beijing later in the year.
Last
month, Defense Minister Pranab Mukherjee visited
China. In a major confidence-building measure, the
two countries signed their first-ever memorandum
of understanding on defense, which paves the way
for more joint exercises, training sessions and
transparency.
The visit followed the
historic visit of US President George W Bush to
New Delhi in March, which emphasized Washington's
strategic shift toward India, ostensibly to check
the growing might and influence of China in the
region. India has all along insisted that its
Beijing policy is independent of dealings with
Washington. According to reports, China and
India plan to make a joint $2 billion bid for
oilfields in Kazakhstan as the world's two
fastest-growing major economies seek to avoid
competing against each other. This follows a
successful joint Sino-Indian bid in December to
buy Petro-Canada's 37% stake in Syrian oilfields
for $573 million. Last August, China National
Petroleum Corp agreed to pay $4.18 billion for
PetroKazakhstan, outbidding India's Oil and
Natural Gas Corp in a fierce takeover duel.
At the recent Shanghai Cooperation
Organization (SCO) summit, Hu told the Indian oil
minister that China is keen to develop a long-term
partnership with India. However, translating such
economic goodwill into a strategic alliance that
will extend to Beijing backing India on the
Indo-US nuclear pact, support at the Nuclear
Suppliers Group, a seat at the United Nations
Security Council, and refraining from supporting
Pakistan's military programs looks to be some way
off.
New Delhi has always been wary of
China's influence in its immediate neighborhood -
Nepal, Bangladesh, Bhutan and especially Pakistan.
Islamabad recently declared that if the US does
not offer nuclear know-how to Pakistan, it will
obtain the equivalent information from China.
Beijing has kept quiet on the issue, a reflection
of its keenness to keep Islamabad happy and
counteract US influence through India, if needed.
In keeping with Washington's sensitivities
and an eye on the nuclear deal, New Delhi has
postponed the first ever testing of the Agni-III
intercontinental ballistic missile, capable of
delivering a nuclear payload. Manmohan gave the
SCO summit a miss (despite his keenness to be part
of the new "energy club"), as he couldn't afford
to be seen hobnobbing with Iranian President
Mahmud Ahmadinejad.
Such are the byzantine
complexities and tradeoffs involved in India-China
relations. By comparison, business matters are
simple: both peoples can only benefit if trade
reaches new heights - literally.
Siddharth Srivastava is a New
Delhi-based journalist.
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2006 Asia Times Online Ltd. All rights reserved.
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