More than US tariffs, it is the uncertainty and lack of trust among countries that will have the most negative consequences for the global trade order, according to Jean-Pierre Landau, Associate Professor of Economics at Sciences Po, France. The former IMF and World Bank executive director in an interview with The Indian Express said while the impact of tariffs may seem limited, it could pose a lasting challenge and would be harder to reverse. In context of the Russian oil import-related US tariffs on India, Landau said New Delhi’s evolving role as a stabilising force may bring it to act at cross purposes with the West. However, there’s a concern that in the current geopolitical scenario, India’s necessary balancing act should not take it too far away from the West. Edited excerpts: The US is radically changing its trade policy. While there are disruptions, Washington has also signed several trade deals. How do you perceive the effectiveness of these measures? To the extent that those measures are aimed at re-establishing or protecting the competitiveness of what I would call old-style industries, it is very hard to see how that could be positive for the US economy, which has a huge comparative advantage in high-tech sectors. From that perspective, I think additional analysis is needed. Then you notice that, till now, no negative effects have materialised. That can be attributed either to an exaggeration of the problems by observers or to a delayed reaction by financial markets. The big issue now is uncertainty. Uncertainty is very toxic because it does not show its effects immediately, but once the effects arise, it is very hard to reverse. From anecdotal evidence, I understand that a lot of big corporations have reduced or suspended their investment plans. So it may be too soon to tell. The EU’s trade deal with the US seemed more of a security deal than an economic one. Do you see India having similar compulsions to sign a deal with the US? As you are aware, even in Europe, this (US-EU trade) deal is very controversial. A lot of people see it as an undue abdication into an asymmetric situation for, as you said, strategic reasons; others see it as the lesser of two evils. One is justified in holding either opinion. The real question is how do we come out of this succession of ad hoc deals made with different countries, each subject to different constraints and different political visions about the future. And again, it comes back to uncertainty. In my personal view, more than tariffs themselves, more than the measures, the lack of trust in each other’s behaviour is what will ultimately have the most negative consequences. India’s Russian oil imports have become a tense issue in its relationship with the US. Many view it as bullying. Do you think it’s the right approach to end the Ukraine war? I’m not an expert on Ukraine, but I think I can make two very important remarks on your question. The first is that using tariffs as instruments of geopolitical coercion does not seem to me to be a good idea. Sometimes financial sanctions can be seen as an alternative to military conflict, but introducing tariffs, volatility and uncertainty as geopolitical tools — and as you know, India has not been the only target; another big emerging economy has also faced this — is not a good idea for anyone, including the United States. The second point is that I am very much worried, and I think all of us in Europe are aware, that India is now a key geostrategic player. It is a force for equilibrium, stabilisation and balance. It is very important that India can play that role; we all stand to benefit from it. It may at times mean that India will take positions or measures that we do not like, but that is the nature of a balancing act. And again, I am not a diplomat, nor am I expressing any official position, but I do not think we should do anything that would be seen as conflicting with what India is trying to achieve now. China has increasingly signalled its ambition to lead the world trade order. Do you think Beijing is close to achieving that even as it grapples with problems of consumption and overcapacity? I think it has been clear for a decade now that China’s ambition is to be an alternative leader for globalisation — an alternative to the US, perhaps with a different vision. The kind of order China would like to promote so far has materialised through the Belt and Road Initiative. It is not clear how it can expand and develop into a more complete system. China’s integration with the world over the last 20 years has been much more disruptive than everyone expected. It has been a huge success from a Chinese perspective, but much more disruptive for the rest of us — in terms of trade flows, industrial adjustment, and our dashed hopes that China would co-manage the system with the rest of us. That has not happened. The idea, I think, would be for the community of nations to collectively confront the problem and find a way to integrate China, its success, ambitions, and imbalances, within a consistent framework. Globalisation had its winners and losers. Which countries or sectors would be the winners and losers of this trade war? Let us not throw the baby out with the bathwater. Whatever the problems of globalisation, and there are many, it has been extraordinarily successful. It has lifted billions of people out of poverty and can continue to do so. It is, therefore, very important that we do not give up on its benefits. Africa — the continent that I think India is increasingly interested in — poses the main challenge. Its population will double in the next 30 years. It is crucial that the prospect for growth, which in Africa’s case can only come from globalisation, materialises; otherwise, we will all face enormous problems. What is the one thing that worries you about India in the global context, and the one thing that makes you most optimistic? I am very optimistic about the technology, wisdom and industriousness of the Indian people. I am extremely impressed by their ability to work and to learn. I would be worried, though I don’t think it will happen, if India’s necessary geopolitical balancing act were to take it too far away from the Western world. That would be my concern.
