US President Donald Trump has dragged both India and China into a ‘trade war’, indicating a rocky road ahead for the world’s two largest economies.
The US has challenged India’s export subsidy programmes such as Merchandise Exports from India Scheme in the World Trade Organisation (WTO), asserting that these initiatives harm its companies by creating an uneven playing field.
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Washington has sought consultations with India under the aegis of the global trade body’s dispute settlement mechanism.
If the two nations fail to reach a mutually agreed solution through consultation, the US may request for a WTO dispute settlement panel to review the matter.
When asked if there is a trade war between India and the US, Commerce Secretary Rita Teaotia told reporters in New Delhi that it would be ‘pretty irresponsible’ as both the countries have lot of export interests in each other’s markets.
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China too has had its share of woes wherein President Trump signed an executive order in late January that imposed tariffs on washing machines and solar panels which has ignited a trade war with South Korea and China.
The counterpunch from China could land harder because of the scale of trade between the two countries and the reliance of American farmers on China as an export destination.
China’s Ministry of Commerce is already investigating whether to limit imports of US sorghum, a cereal grain used to feed livestock, in response to previous tariffs from the White House on solar panels and washing machines.
An all-out trade war is in the making since President Donald Trump ushered in steep tariffs in steel and aluminium.
China has slammed the proposal, saying that such protectionist moves, which come in the garb of national security, will lead to huge imbalances in international trade.
Experts point out that the tariffs announced by the US are much steeper that what the markets had anticipated.
Although the damage may be limited for India now, considering the low trade volumes in steel and aluminium trade between the two countries, economists say that a full-fledged trade war between the US and China will have huge repercussions for the domestic business, too.
The US has also put India on the foreign exchange watch list along with China and a few other countries.
Senior officials in Prime Minister Narendra Modi’s party say India stands to benefit from the tensions.
President Xi Jinping will need India’s huge market as President Donald Trump threatens punitive measures against Chinese manufacturers and US firms that produce goods offshore, says Seshadri Chari, a national executive member of the Bharatiya Janata Party.
The requirement for Beijing to maintain economic growth and domestic political stability also gives New Delhi geopolitical leverage as it seeks to counteract China’s inroads in South Asia, including in Pakistan, he said.
“China’s production strength requires a market, and the US is no longer a Chinese market,” Chari said in an interview.
“China at this stage cannot risk a meltdown in its economy. It’s too politically risky for Xi Jinping. They need a big market. And in Asia, we are the largest market.”
Congress lawmaker Shashi Tharoor, who chairs India’s parliamentary standing committee of foreign affairs, suggested China-US tensions could push both countries toward India.
“If the U.S. and China don’t get along, the US will turn increasingly to India as a large Asian actor,” said Tharoor, a former junior foreign minister in the previous Congress government.
“And China, if its US market contracts, will need to diversify its markets and investment outlets, including towards India.”
As of now, the two Asian giants, seem to be battling a common foe, and it remains to be seen, if a camaraderie arises from the ‘looming trade war’.
Already there are clear signs that China and India are warming up towards each other, despite the long border face off at Doklam on the Sikkim-Bhutan-India tri-junction.
A host of high level visits are lined up for the weeks ahead. Chinese and Indian foreign spokespersons have begun to stress on ‘positive gains’.
Days after newspaper reports of a top official directing all government functionaries to avoid events commemorating 60 years of the Dalai Lama’s exile in India, the Tibetan ‘government in exile’ has decided to shift major programmes slotted for Delhi on March 31 April 1 to Dharamsala in Himachal Pradesh.
While officials from the Central Tibet Administration (CTA) – the NGO that the exiles run – denied receiving any instructions from the Indian government, China-watchers in Delhi say they are puzzled by the underlying message the Modi government is sending with its new circular, given how it had earlier projected a willingness to play the ‘Tibet card’.
The Indian Express reported on March 4 that Cabinet Secretary P K Sinha had issued a classified circular ‘discouraging’ government functionaries – political and bureaucratic – from attending events organized by the Tibetan government-in-exile to mark the key anniversary over the next few months.
India and China are looking at a high level economic summit soon in which both countries will pitch strongly for ‘the forces of globalization’ and work to defend their economies from the Trump effect.
Smaller nations in Asia, especially in South Asia, will look forward to a growing Sino-Indian understanding.
Nepal, Bangladesh, Sri Lanka and Myanmar will all benefit if India and China collaborates and cooperate rather than compete and promote conflict.
If the two Asian giants harmonize their Belt-and-Road Initiative and Look East policies, these smaller nations are sure of a windfall in investments in infrastructure.
But both would first need to scale down their military posturing on a long disputed Himalayan border and work for a final settlement , either on a sector by sector or on a comprehensive basis.
Such a settlement will give China a break from the moves to contain it and may provide Modi with his biggest feather in the cap (or pagri which he fondly wears) before elections.
And China is the only power which can effectively rein in Pakistan and push it to normalise relations with India.
Such a scenario is always more acceptable for India than the endless reverberations of war drums in the Himalayas which only gladden hearts and fill up pockets in Washington through arms sales.
Subir Bhaumik is a veteran journalist based in Kolkata and author of several books on Northeast. He can be reached at [email protected]