From UPSC perspective, the following things are important :
Prelims level : Not much
Mains level : Paper 3- Exploring potential for a Westward trade push
After walking away from the RCEP, India needs to find alternative trading partners that can offer the potential for trade expansion. The article suggests a Westward trade push as an alternative.
Forging trade deals with the Western countries
- Our rejection of RCEP, which covers much of the eastern hemisphere, had exposed us to the risk of losing out on cross-border commercial relations in a highly dynamic part of the world.
- To compensate for the opportunity cost of that decision, it was imperative to strike other alliances.
- As a part of this, India adopted a roadmap for the rest of this decade to elevate ties with the UK and also moving to revive free-trade talks with the EU.
- An India-UK plan unveiled recently will raise our bilateral relationship to a ‘comprehensive strategic partnership in such areas as economic affairs, defence and health.
- The two countries signed a £1-billion trade investment pact that is expected to generate jobs in both.
- Separately, India and the EU are reportedly working out how to resume stalled negotiations for a trade deal.
Issues India may face
- The signing of pacts would involve mutual tariff reductions and the lowering of other barriers, both of which have proven thorny so far.
- In general, while the West wants us to lower import duties, our negotiators have been citing India’s sovereign right to protect domestic businesses under World Trade Organization rules.
- Globally, even before covid knocked the wind out of the sails of cargo ships, commerce across borders had been doing badly under the extended effects of a financial crisis that shook things up in 2008-09.
- But world trade remains a reliable path to global prosperity and must therefore regain its gusto.
- For us, deal-making would mean opening up markets to imports in lieu of easier access to foreign ones.
- Concessions that cause very few job losses in India can easily be made. A broad cost-benefit analysis will have to guide our approach to talks, on complex issues like US visa rules which affect our software exports.
- Since it is governments that thrash out deals, geopolitical convergences are often sought too.
- We seem to be in a favourable position on this, given the West’s need to keep China’s rise in check.
- The UK’s Rolls-Royce has just inked a memorandum with Hindustan Aeronautics Ltd for warship engines, a sign of our strategic ties.
- Technology could come our way from the US, too.
- If we can leverage an ability to play a role in Asia’s balance of power to our economic benefit, we should.
Mutually assured flexibility on tariff concessions would help India and its Western partners score economic gains and also counterbalance China’s growing dominance of world trade.