NEW DELHI – The fact India opted out of the largest free-trade zone in the world was a cunning move, according to several experts who described the Asian giant as the elephant in the room.
India has abandoned negotiations to create the Regional Comprehensive Economic Partnership (RCEP) that will bring together 15 nations from Asia and Oceania: China, Japan, Australia, South Korea and New Zealand.
The trade partnership also encompasses the 10 members of the Association of Southeast Asian Nations (ASEAN), which includes Myanmar, Brunei, Cambodia, Philippines, Indonesia, Laos, Malaysia, Singapore, Thailand and Vietnam.
Piyush Goyal, Indian Minister for Commerce and Industry, said the decision was final and would protect Indian interests avoiding bad business practices.
Although the minister did not mention China, experts have said Beijing is the main reason behind the decision.
Delhi Ram Khanna, ex-dean of the Faculty of Commerce of the University of Delhi, welcomed the move which he said addressed the fact “China appears to be the elephant in the room.”
The former dean made the comment with regards to doubts over whether China enjoys a market economy given the dominance of state enterprises, bolstered by subsidies, which leave room for unfair competition.
“The dominance of state undertakings in Chinese economic activity creates room for dumping and currency manipulation to drive Chinese exports that may damage local industries.
“China already has a huge trade surplus with India which is likely to go up further in case China gains more favorable market access terms,” Khanna added.
India’s trade deficit compared to China exceeded $53.5 billion in the 2018-19 fiscal year, according to official data.
“The India-China border dispute has been simmering on the back burner for over six decades.
“It has bred mistrust between India and China and the trade benefits are discounted due to geopolitical strategic factors,” Khanna said of India’s decision to abandon trade talks.
A specialist on International Commercial Law from the same university who preferred to remain anonymous said: “It must be seen against the background of a non-supportive attitude of the Chinese government regarding curtailment of terrorism and siding with Pakistan.”
India’s neighbor has long been seen as an enemy nation over the fight to control the Kashmir region.
The trade balance is also a source of concern for Naimat Chopra, an economist and collaborator of the Confederation of Indian Industry (IIC).
Chopra said the current unfavorable trade gap for India with respect to Australia and South Korea could widen, and the antipodean country’s power in the perishable food sector could pose a threat to the Indian economy.
“Australia specializes in dairy products which may threaten the Indian dairy sector which is largely based on household subsistence animal husbandry in poor rural zones as compared to large commercial farms in Australia,” Chopra told EFE.
The South Korean manufacturing industry could also undermine the Make in India program which seeks to boost the country’s industrial development, the expert added.
When asked whether any negative spillovers would be felt, Chopra was confident that they would not be serious.
“India does not have an export-led strategy of growth like China then it does not need a very large share of global markets for sustaining its economic growth,” Chopra continued.
According to the expert, India’s domestic market has sustained its growth over the last seven decades because it is based on domestic demand.
The anonymous commercial law expert suggested India may have a played a strategic card to appease the United States, given the ongoing trade war between the two world powers.
In a context where US President Donald Trump has snubbed multilateralism in favor of protectionist trade policies, India’s move may be seen in a positive light by Washington.
However, Khanna opined that India’s policy decisions on foreign policy were done in its national interests alone and that it was not subservient to any country including the US.
“India did not back down under US pressure to not buy a Russian anti-missile system and it has not followed the US policy on Iranian relations,” Khanna added.