Hindi-Chini,by and by

There is a second,very different perspective that views China in brutal economic terms as a very large market — soon to be the world’s second largest economy — where instead of troops in uniform India needs to send troupes of businessmen and women to capture a significant share of the market in the world’s fastest growing economy. The need to gain traction in term of business in China has only been made more urgent after the global economic crisis has badly damaged our more traditional targets for trade and investment — the economies of the developed world.

Curiously enough,this was the dominant mood among both Indian business delegates and Indian government representatives from the commerce ministry,at an India-China Trade and Investment Forum meeting in Beijing last week. Interestingly,India hasn’t gained much of a foothold either in terms of exports or investment in China thus far. Our trade deficit with China is the largest we run with any single country,and 50 per cent of our exports consist of iron ore,a low value commodity. Industry and government blame the high level of tariff and non-tariff barriers imposed by the Chinese on our most competitive goods and services,including IT,pharma,agricultural goods,power equipment and films/ entertainment. In an unusual and aggressive step,the commerce ministry of India issued a stern note of protest to their Chinese counterparts demanding specific action on a number of barriers to Indian exports after a meeting of the Joint Economic Group between the two countries failed to yield enough concessions.

But resolving disputes in trade are not likely to be anywhere near as protracted as resolving longstanding political differences. For one,there is plenty of room for quick give and take on both sides. It is in China’s interest to concede some ground on trade barriers,as they have a big stake in market access to the Indian economy. As China’s biggest market,the US,continues to grow slowly,China desperately needs newer markets to return to double digit growth — growing at 7-9 per cent per annum,India is too attractive a market to be shut out of. China also wants its workers to be granted more visas to work on projects in India,something India can use as a bargaining chip to gain more market access. So unlike the bilateral political relationship that is arguably skewed in favour of China because of its superior military prowess and greater clout as a member of the P-5,the bilateral economic relationship gives India more room to manoeuvre,without having to up the ante to a “war cry” or to talk completely submissively about Hindi-Chini bhai-bhai.

The third view of our engagement with China deals with the interaction between the two countries at multilateral forums. Until recently,we dealt mostly with an uncooperative China at the United Nations — on Pakistan,on a permanent Security Council seat for India and so on. However,three recent multilateral initiatives have considerably changed the India-China dynamic — climate change,G-20 and Doha trade talks.

At the climate change talks in December,climate negotiators from China and India along with Brazil and South Africa forged an effective coalition to protect their interests and corner the developed world. Earlier,at the WTO’s mini-ministerial in Delhi in September,China and India again found much common ground. And in the new global club of the G-20 which met at various points throughout 2009,finance ministry officials from both China and India closely allied to get a greater say for both countries (and other emerging countries) in any new architecture on global financial governance.

Unsurprisingly,what binds us more tightly than anything else at these forums is the weight of our economies,particularly when we put our combined economic interests up against the economic interests of developed countries.

In fact,at some multilateral forums,notably on climate change and WTO,India may even have the upper hand on China. At both these forums,China arguably needs us more than we need them. For once,being the larger and faster growing economy renders China more vulnerable. The developed world will obviously expect sharper emissions cuts from China than from India just as they would want greater market access to what is by far the bigger market. India,on the other hand,could strike a “sweetheart” deal with the West in both climate and WTO that would leave China without any political cover.

The real challenge for the Indian government is to form a more holistic policy towards China that incorporates all the different dynamics of the engagement between the two countries,some which are indeed very recent,across different spheres. The problem with the government is that it more often than not gives the impression of operating in silos,for reasons that may actually be no deeper than superficial turf battles.

So the MEA,for example,may not automatically take inputs from the ministries of commerce,environment and finance,all of which are also engaged in important diplomacy with China. This is obviously not a China-specific division of turf,but given that our relations with China are more complex than with most other countries,some coordination across different departments of government can only help. Some of the give and take associated with negotiations in different policy spheres can surely be done cutting across silos.

With an old China hand being appointed the new national security adviser,this should change.

The writer is a senior editor at ‘The Financial Express’

dhiraj.nayyar@expressindia.com