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      Trump at the UN: A Failure to Lead

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      True to himself, US President Donald Trump completely failed to address any of the issues confronting the global community in his keynote speech to the 74th General Assembly of the United Nations. Instead, he used the platform to criticize China, to excoriate Iran, to boast of how big and dangerous the US military has become, and to urge every nation to close its borders to even the most hungry or persecuted migrants. He did, however, think it appropriate to support the right of all Americans to own as many guns as they want.

      In the same speech, Trump made headlines with his words urging the world to hold China accountable for having “unleashed this plague on to the world,” in reference to the COVID-19 pandemic, and for deliberately encouraging the coronavirus to spread. The White House cut these words from the transcript posted on its website. Perhaps even the administration’s press office did not have the stomach to publish such libel.

      This speech to the UN was a moment when the leader of the free world — as a US president might once have been seen — could actually attempt to lead. The speech was an opportunity to inspire and to set out a roadmap to a better future. Trump chose to do the reverse. The world is facing a triple crisis of an international pandemic, economic collapse and climate emergency. Trump could only reach out for people to blame: the Chinese, Iranians or Venezuelans. He failed to mention that the United States has the biggest coronavirus death toll of any country in the world, with over 200,000 dead and counting. 

      Nor did Trump comment on the millions out of work or that America’s west is burning at the same time that its southeast is inundated by hurricane after hurricane. These are not just America’s problems: Trump did not address the dire straits of billions of non-Americans impacted by these dangers. Why would he? This is the true measure of “America First.”

      The American leadership vacuum is a grave danger to not just Americans but to us all. Trump’s failure to act early to stem coronavirus infections — a deliberate decision he made to fatuously “avoid panic” — will likely cost the lives of tens of thousands more Americans on top of the current staggering death toll. The US withdrawal from the World Health Organization in the middle of the pandemic signaled that Trump wanted no part of the international leadership out of the health crisis. The resultant deaths will be beyond imagination.  

      Trump has employed the same approach to international economics. His regime’s policy has been to withdraw from trade agreements, set up sanctions barriers against competitors and allies, and complain that everyone else’s industrial policies are more successful than his. Trump has also embarked on a determined effort to weaken the international institutions — the International Monetary Fund, the World Bank, the World Trade Organization and so on — that have enabled the world economy to prosper for the past 75 years. The world is going to need a great deal of leadership to emerge out of the current economic wasteland, on a scale of what was done to repair the damage of the Second World War. We can rely on Donald Trump to be absent from that role, too.

      As for the climate emergency, Trump has chosen to deny it. More than that, he has proceeded to undo everything previous US governments and the international community had done to try to save the planet from disaster. All of these crises are going to produce millions of refugees across the world. Trump couldn’t care less.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      Can the India-China Confrontation Play Out in East Africa?

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      China and India have never been friendly neighbors. The laws of geopolitics set the two Asian giants against one another. In recent years, Chinese President Xi Jinping’s confrontation with the US and Indian Prime Minister Narendra Modi’s ambitions for a powerful and global India have inflamed nationalism on both sides of the Himalayan border. Bilateral tensions peaked in June, when a border clash in the Himalayan Galwan Valley resulted in the death of 20 Indian soldiers and an unspecified number of Chinese troops.

      Han and Hindu Nationalism Come Face to Face

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      Now, the competition between China and India is moving to Africa, and to East Africa in particular. Since 2000, the continent has witnessed China’s deep and ubiquitous penetration through trade, investments, infrastructures, energy, budget support and security cooperation. In 2008, New Delhi showed a newfound interest in Africa.

      Despite China’s head start, India is trying to catch up to counter Beijing’s predominance over the continent. East Africa is the region where the two Asian powerhouses share vital interests and where their competition will likely play out more seriously.

      India’s Africa Policy

      India–Africa relations are rooted in history. The Indian Ocean constituted a channel of trade and population exchange for centuries. Consequently, East Africa has always enjoyed close ties with India, and around 3 million people of Indian descent live between the Horn and South Africa. After independence from British rule in 1947, India was politically active in Africa as a champion of decolonization and South-South cooperation. The period that followed saw India–Africa relations phase out until New Delhi brought the continent back into the picture from the mid-2000s.

      In economic terms, trade augmented eightfold between 2001 and 2017, making India Africa’s third-largest trading partner with a total exchange worth $62.6 billion. While Chinese trade with the continent largely outnumbers it, India has kept up the pace and investments grew alongside trade, jumping to $54 billion in 2016.

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      As a fast-growing manufacturing power, India places strategic relevance to raw materials for the stability of its supply chain and energy sector. Indeed, New Delhi’s exchange with Africa, like Beijing’s, is driven by natural resources — with oil and gas accounting for approximately two-thirds of the total — followed by gold and other ores.

      Political ties have also strengthened over the years. In 2008, the first India–Africa Forum Summit was launched in New Delhi and took place again in 2011 and 2015, with 41 African heads of state attending; the next conference was scheduled in September 2020. These summits allowed African leaders, on the one hand, to set out their cooperation priorities and India, on the other, to respond accordingly. As a result, India–Africa cooperation pivoted around capacity building, technology transfer and infrastructural investments. Lastly, India has sought support on UN reform, which would be unrealistic without the votes of African countries in the General Assembly.

      Security issues have been on the agenda as well. New Delhi is particularly active in the realm of anti-piracy. After the kidnapping of several Indian citizens by Somali pirates, the Indian navy stepped up its efforts after 2008 and escorted over 1,000 vessels across the Gulf of Aden, sometimes in cooperation with the European Union’s Mission Atalanta.

      Another domain that saw India at the forefront is UN peacekeeping missions. The Indian subcontinent has always been one of the leading suppliers of peacekeepers to UN missions, with 80% of them deployed in Africa. On top of that, Indian defense academies have provided training to the Nigerian, Ethiopian and Tanzanian military.

      Modi and the Challenge to China

      Modi has given further impetus to India–Africa relations. In July 2018, he outlined the 10 guiding principles of India’s engagement with Africa during a visit to Rwanda and Uganda. On that occasion, the prime minister leveraged India’s role in South-South cooperation to advance his credentials as leader of the developing world. Besides rhetoric, Modi moved from words to action by signing a defense agreement with President Paul Kagame of Rwanda and by extending two credit lines worth nearly $200 million to the Ugandan government. He also announced the opening of 18 new diplomatic missions in Africa by 2021, bringing the total to 47.

      The prime minister has placed a keen eye on East Africa, which is set to become the epicenter of the India–China confrontation. The Red Sea and the Gulf of Aden are essential maritime routes for India’s export-oriented economy. China is heavily investing along these two waterways through the “Belt and Road Initiative” (BRI), especially in the port of Djibouti and the Suez Canal.

      Djibouti is indeed becoming yet another element of the Chinese maritime network in the Indian Ocean, along with Pakistan, the Maldives, Sri Lanka, Bangladesh and Myanmar. This network, the so-called “String of Pearls,” geographically surrounds India and is perceived as a strategic nightmare in New Delhi. Therefore, the Chinese expansion in the western Indian Ocean urges India to intervene.

      To counter the BRI in the Indian Ocean, New Delhi launched a similar initiative for East Africa: the Asia-Africa Growth Corridor (AAGC). Conceived in 2016 and still at an early stage, this Indo-Japanese project will attract investments on development, quality infrastructure, institutional connectivity, capacity building and people-to-people cooperation to the region. Due to its anti-Chinese nature, the AAGC primarily targets contested countries like Djibouti and Ethiopia.

      In 2017, Indian President Ram Nath Kovind clustered both countries for his first official visit. At the time, Ethiopia was already the largest beneficiary of India’s scholarship scheme and lines of credit for Africa with $1.1 billion, besides being the scene of the 2011 India-Africa Forum Summit. Djibouti was a relatively new target for New Delhi. In the year of the visit, China opened its first overseas military base in Djibouti. Consequently, Kovind not only signed some cooperation agreements, but he also reportedly expressed India’s interest in a military base on Djiboutian soil, a project still under discussion.

      The geopolitical confrontation between India and China looms on the horizon. Africa — particularly the east — is set to become an arena of such a global, momentous challenge. India has economic, energetic and security reasons to deepen its relations with the continent. Furthermore, China’s ubiquitous presence in Africa and the Indian Ocean is a direct menace to Modi’s global ambitions. Although China is still out of reach, New Delhi’s engagement has been steadily expanding in all fields, and its approach based on soft power looks promising. The concepts of building Africa’s capacities and unleashing its potential, along with the employment of African workers instead of foreign labor like China, have resonated across the continent.

      On the one hand, East Africa is under India’s radar more than any other region of the continent for its strategic position. On the other, East African governments have a long track record of balancing off the influence of external actors. East Africa is also the region where India can rely on a robust diaspora community. Hence, India presents itself as a useful ally to balance China’s growing influence in the region.

      Finally, yet importantly, the US and the European powers might prefer New Delhi’s penetration into the continent at the detriment of China’s, which is perceived as a growing geopolitical threat to the West. East Africa, in sum, might soon become the new battleground of the economic and security confrontation between the two Asian giants.

      *[Fair Observer is a media partner of Gulf State Analytics.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      What Can the Gulf States Learn from the Belarus Crisis?

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      It might come as a surprise that the Gulf states have more than a passing interest in events in Belarus. Beyond growing economic ties, the political drama provides valuable lessons for the region’s monarchies and their efforts to maintain standards of living for their citizens without compromising power and influence. The Belarus crisis also offers useful pointers for Gulf states in their dealings with Russia.

      Over the past three decades, Belarusian domestic politics has been defined by its predictability. Despite the emergence of opposition candidates around election time, President Alexander Lukashenko’s grip on power was such that there was only one outcome. Yet, as with so much of 2020, life as Belarusians know it has been turned on its head.

      Big Blow for a Stable Dictatorship: Major Protests Hit Belarus

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      While the veracity of past elections has been called into question, a mixture of political complacency and COVID-19-related turmoil has breathed new life into Belarus’ opposition movement. Beyond disputing Lukashenko’s winning margin in July’s poll, hundreds of thousands of ordinary Belarusians have taken to the streets calling for change. Mostly born after the collapse of the Soviet Union, this generation does not regard the stability offered by Lukashenko as an asset. As they see it, state control of Belarus’ economy and society is incompatible with their aspirations.

      Lukashenko’s response to what has effectively become a matter of life and death for his regime has fluctuated between incoherency and heavy-handedness. The president’s disappearance from the public gaze at the start of the unrest, coupled with the disproportionate use of force against demonstrators, suggests that he did not seriously consider the possibility of mass protests. Continued police brutality and opposition candidate Svetlana Tikhanovskaya’s flight into exile make it difficult to use “external forces” as justification for the crackdown.

      “Family” Comes First

      Much like Belarus, the Gulf states have relatively young populations, particularly Saudi Arabia, where over two-thirds of citizens are under the age of 35. Many have benefited from access to higher education systems that have grown exponentially since the early 2000s, both in terms of state and private universities. With this in mind, the region’s political elites can use the lack of meaningful opportunities for so many Belarusians to underscore the importance of their development plans and national visions.

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      Designed to meet the specific needs of Gulf countries, these strategies nevertheless have several objectives in common. In an effort to counter faltering prices and technological obsolescence, the region is attempting to diversify its dependence on oil and gas revenues by facilitating high-knowledge-content jobs in different industrial sectors. Doing so also requires the greater incorporation of indigenous populations into national workforces at the expense of expatriate workers. In this respect, Kuwait’s plans to drastically reduce its migrant population offers a glimpse into the future shape of the Gulf’s workplaces. While never explicitly mentioned in strategic documents, the Gulf states anticipate that encouraging their own populations’ development will offset opportunities for the type of political dissent that’s currently gripping Belarus and which rocked Bahrain almost a decade ago.

      The Gulf’s rulers have no appetite for an Arab Spring 2.0, a scenario that some warn is a distinct possibility thanks to COVID-19. Accordingly, local development opportunities will continue to be encouraged during these chastened times. When it comes to wider political participation, Kuwait will remain something of an outlier for the foreseeable future.

      The Gulf states’ responses to COVID-19 also merit consideration. Once dismissed by Lukashenko as an ailment that can be treated with saunas and vodka, Belarus was among the last in Europe to enact lockdown measures. While it remains to be seen what impact ongoing protests will have on infection rates, a spike in cases could be used by Gulf states to justify their no-nonsense approaches to tackling the virus. Qatar, for example, was one of the first to completely lock down all but the most essential public services. The country’s return to normal rests on the public’s strict compliance with a four-phase reopening plan.

      Don’t Annoy Next Door

      International reaction to the political crisis in Belarus has so far been muted, with presidents Vladimir Putin of Russia and China’s Xi Jinping leading the congratulations for Lukashenko’s re-election. For its part, the European Union’s response has been cautiously led by the likes of Lithuania and Poland. Their approach reflects two important points. First, the protests are highly internalized and not about pivoting Belarus further East or West. Second, direct support for the opposition risks a Ukraine-type scenario whereby Moscow directly intervenes to safeguard its interests.

      Point two is of particular relevance to the Gulf states, whose economic ties with one of Russia’s closest allies continue to grow. Cooperation between Belarus and the United Arab Emirates is a case in point. According to government statistics, the volume of trade between both countries amounted to $121 million in 2019, up from $89.6 million the previous year. Minsk has also made overtures to Oman regarding joint manufacturing opportunities and the re-export of products to neighboring markets.

      Saudi Arabia undoubtedly has the most to lose from antagonizing Russia in its own backyard. Last April, the kingdom sold 80,000 tons of crude oil to Belarus. This purchase, first of its kind, not only reflects Minsk’s determination to lessen its reliance on Russian supplies, but also happened against the backdrop of faltering demand and an oil price war between Moscow and Riyadh. Since then, both sides have brokered a fragile peace designed in part to ensure that OPEC+ members respect industry-saving production cuts.

      Accordingly, the “softly, softly” approach currently being employed by the EU’s eastern flank provides a blueprint for how the Gulf states should continue to manage their responses to the Belarus crisis. Not only does it offer the best chance of maintaining economic relations irrespective of the final outcome, but it also keeps regional oil supplies in still uncharted waters at a time of great uncertainty in global markets. Antagonizing Russia with even the most tacit support for Belarus is, put simply, too risky a proposition.

      Belarus’ unfolding crisis is ultimately about replacing an unmovable political leader and system that have dominated the country for decades. In a region defined by its own version of long-term political stability, a similar scenario among Gulf states is unpalatable. Fortunately, the region still has resources at its disposal to prevent this from happening and protect much-needed economic victories in new markets. While always important, the Gulf’s indigenous populations are increasingly being reconfigured as the most essential features of the region’s future prosperity and stability.

      *[Fair Observer is a media partner of Gulf State Analytics.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      The Unintended Economic Impacts of China’s Belt and Road Initiative

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      China’s footprint in global foreign direct investment (FDI) has increased notably since the launch of the Belt and Road Initiative (BRI) in 2013. That served to bring Chinese overseas FDI closer to a level that one would expect, based on the country’s weight in the global economy. China accounted for about 12% of global cross-border mergers and acquisitions and 9% of announced greenfield FDI projects between 2013 and 2018. Chinese overseas FDI rose from $10 billion in 2005 (0.5% of Chinese GDP) to nearly $180 billion in 2017 (1.5% of GDP). Likewise, annual construction contracts awarded to Chinese companies increased from $10 billion in 2005 to more than $100 billion in 2017.

      Interestingly, however, the American Enterprise Institute’s China Global Investment tracker recorded $420 billion worth of investment and construction in BRI countries versus $655 billion in other countries between 2013 and 2018. So China actually invested more in countries outside the BRI during the period, given that Chinese investment in developed countries tends to have larger market values, particularly for mergers and acquisitions.

      Additional Pain

      Based on other measures, however, Chinese investment in BRI nations was much larger as a percentage of its total investment for the period. For example, greenfield investment represented almost half of all investment in BRI countries, but only 13% in other markets. Chinese firms were awarded $268 billion worth of construction contracts in BRI countries versus $166 billion elsewhere. Greenfield investment and construction in BRI countries amounted to $340 billion versus $230 billion in non-BRI countries.

      The subsidies that Beijing contributes to its state-owned enterprises implies that many of the BRI projects actually cost it far more than the face value of the construction and investment, meaning that loan defaults — a common occurrence — add that much more additional pain to Beijing’s coffers.

      The BRI: Keeping the Plates Spinning on China’s Economy

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      Asia attracted the majority of BRI-related investment and construction contracts between 2013 and 2018, receiving just over half of such activity, with Southeast Asia taking 46% of that amount. Africa received 23%, followed by the Middle East at 13%. Overall, approximately 38% of total investments and construction contracts were targeted at the energy sector in host nations, with 27% ending up in transport and 10% in real estate.

      The largest BRI project as of 2018 was the China-Pakistan Economic Corridor, which links Kashgar in China’s Xinjiang province with the port of Gwadar in Pakistan. Investments and construction contracts worth nearly $40 billion had been devoted to the project, with total spending likely to reach in excess of $60 billion by the time it is finished, equivalent to about 20% of Pakistan’s nominal GDP. The country endured a large increase in imports of materials and capital as a result, which aggravated its trade imbalance. By 2018, its current account deficit had expanded to more than 6% of GDP from less than 2% in 2016.

      Expensive Membership

      While Pakistan’s economic challenges were not and are not entirely attributable to the BRI, the strains added to it by the BRI became highly problematic. That turned out to be a common byproduct of the initiative among the countries receiving the largest amounts of investment. Large debts in countries with limited financial resources and means of generating revenue often undermine governments’ ability to successfully manage their economies. Rather than benefiting from the infrastructure investments made by China, they sometimes end up perpetually treading water.

      Rising debt service often increases a country’s borrowing costs, can raise doubt about its solvency, contribute to a depreciating currency and increase the local currency value of the external debt burden. Consequently, the macroeconomic fallout of being a recipient member of the BRI “club” can be severe, particularly for the smallest and poorest countries.

      A 2018 study from the Center for Global Development has noted, for example, that in the case of Djibouti, home to China’s only overseas military base, public external debt had increased from 50% to 85% of GDP in just two years — the highest of any low-income country. Much of that debt consists of government-guaranteed public enterprise debt owed to China’s Export-Import Bank (EXIM).

      In Laos, the $6-billion cost of the China-Laos railway represents almost half the country’s GDP. Debt to China, Tajikistan’s single largest creditor, accounted for almost 80% of the total increase in Tajikistan’s external debt between 2007 and 2016 period. And in Kyrgyzstan, China EXIM is the largest single creditor, with loans of $1.5 billion, or about 40% of the country’s total external debt.

      It certainly does not appear that Beijing put sufficient effort into contemplating the likely economic impact of the BRI prior to commencing it, either upon host nations or upon itself, for all concerned have borne the consequences of excessive and imprudent lending. Could it be that that Communist Party of China did not care, and that all that mattered was rolling the Initiative out as quickly as possible once it decided to do so?

      It is truly surprising that Beijing did not do a better job of envisioning the multiplicity of potential outcomes. That is undoubtedly the overriding reason why the Chinese government decided to pivot in 2018 and adopt a seemingly more rational, moderate and achievable approach to unleashing the remainder of the BRI upon the world. It now realizes that its reputation and legacy are at stake, never mind the hardship it has placed on scores of developing countries around the world in the process.

      *[Daniel Wagner is the author of “The Chinese Vortex: The Belt and Road Initiative and its Impact on the World.”

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      Why Are the Indian and Chinese Economies Decoupling?

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      Many experts argue India is the weaker power unable to take on China. In an article in Foreign Policy, James Crabtree argues that a trade war with China would be a bad idea for India. In his view, India’s “military is inefficient, underequipped, and dogged by procurement corruption scandals.” To develop its military strength, India needs a dynamic economy, and an “inward economic direction” would only benefit China in the long run. Therefore, an India–China decoupling is a terrible idea.

      Han and Hindu Nationalism Come Face to Face

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      These analysts are wrong. Their argument against decoupling is based on three implicit assumptions. First, India is a deeply-divided country unable to act or respond decisively. Second, India is dependent on the Chinese economy for its growth. Third, China’s rise is inexorable and India has no option but to come to terms with it. These assumptions are true, but it is an error of judgment to treat them as unqualified truths.

      A Trip Down Memory Lane

      For Indians with longer historical memories than many of these experts, these arguments sound familiar. Anglo-Saxon publications have long hectored, advised and moralized on Indian issues. On July 5, 2014, the editorial board of The New York Times made a case against India’s membership of the Nuclear Suppliers Group. To be admitted, India needed “to sign the treaty that prohibits nuclear testing, stop producing fissile material, and begin talks with its rivals on nuclear weapons containment.”

      In response, Gurmeet Kanwal, a retired Indian brigadier-turned-defense analyst, called the editorial “partisan and condescending.” Some even saw it as neocolonial. He pointed to “the existential threat posed by two nuclear-armed states on India’s borders” that led India to develop its nuclear weapons capability. Kanwal argued that India had been a “responsible nuclear power” with a “positive record on non-proliferation” and had “consistently supported total nuclear disarmament.” In typical Sikh humor, he advised nuclear ayatollahs to focus on real proliferators and let go of the cap, roll-back and eliminate (CRE) stance they had adopted against India since the 1990s.

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      Just as India stood up to the US on the nuclear issue in the 1990s, it is capable of standing up to China in 2020. An India–China conflict is highly undesirable. Ideally, New Delhi and Beijing should be able to work something out over endless cups of tea. However, sanctimonious advice from foreign experts about dire consequences of an India–China decoupling has to be taken with a bucket, not a pinch, of salt.

      In 1998, India went nuclear despite dire predictions for its economy. Many in Washington assumed that India depended on the West for its economy. Barely seven years prior, India had experienced a serious financial crisis. The Gulf War and slowing exports to the US crippled an economy by rising deficits and increasing debt. The precipitous decline of the Soviet Union meant India no longer had a godfather to bail it out. So severe was India’s 1991 currency crisis that it had to pledge its gold reserves and liberalize its economy to get a bailout from the International Monetary Fund. In 1998, India was better off than in 1991 but certainly not in a strong position. Nuclear tests put it under immense pressure.

      At the UN, the Conference on Disarmament condemned Indian nuclear tests. In the preceding years, India had watched the West ignore the 1989 Tiananmen Square crackdown and fete China for its economic reforms. Condemnation for nuclear tests strengthened, not weakened, India’s response. It stood up to the West, ignored experts and upended nuclear apartheid. Today, India is again in a mood to defy experts and stand up to China.

      Like Love, Trade Is Complicated

      As troops amass on the India–China border, a full-scale economic war has broken out. It is leading to a structural break in the Indian economy. Both public opinion and political leadership is now committed to decoupling from China. In India, there is a ban on 59 Chinese apps by government authorities. Major trade bodies have formally announced boycotts of Chinese products. For instance, the Confederation of All India Traders (CAIT) has listed 3,000 such products. CAIT is a national umbrella organization with 40,000 smaller trade bodies and 70 million traders as members. The government has tightened country of origin rules for e-retailers and other sellers.

      Demand for Chinese products is declining. Xiaomi is no longer India’s top-selling phone. Samsung has replaced it. Increasingly, selling Chinese goods using Southeast Asian free trade agreements is becoming difficult. The existing business model of buying in China and selling in India is under pressure.

      In an additional twist, Indian tax authorities have conducted raids on Chinese companies and individuals for money laundering. It led to the arrest of a Chinese national. Apparently, he was married to a woman from India’s northeast border state of Mizoram, had spuriously obtained an Indian passport and been arrested earlier for espionage. It seems trade is not as simple as experts imagine it to be. Intelligence, influence and geopolitics are inextricably intertwined with trade, business and investment. In the India–China economic relationship, three largely forgotten factors are noteworthy.

      First, India enhanced trade ties with China not only for economic reasons but also geopolitical ones. Becoming a key market and investment destination for China was supposed to reduce the risk of conflict and wean Beijing off Islamabad. Aggressive Chinese actions have made India reconsider this strategy and change tack.

      Second, India’s manufacturing sector is reasonably well developed but has suffered from Chinese competition since China joined the World Trade Organization (WTO) in 2001. A 2018 parliamentary report concluded that Chinese imports were playing “a negative role for [India’s] domestic industry.” The report warned about the loss of jobs, an increase in bad debts for banks, a decline in tax revenues and a worrying dependence on China for critical products. It concluded that China does not play by WTO rules and “the problem of Chinese dumping is a matter of concern across the globe.”

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      India is not alone in having concerns about China’s abuse of WTO rules. A 2018 report to the US Congress expressed concern at “China’s continued embrace of a state-led, mercantilist approach to the economy and trade.” It detailed “substantial costs borne by WTO members as a result of China’s problematic trade regime” and  the challenges presented by its “non-market economic system.” Given China’s track record, there is a case to be made for India taking a more protectionist path.

      There is another tiny little matter. Protectionism has played a key role in industrialization for any latecomer. Furthermore, industrialization has been the key driver of economic growth. In a 2019 article, one of these authors observed that the first major act passed by Congress was the Tariff Act of July 4, 1789. Without protecting its infant industry, the US would not have emerged as an industrial power.

      Since 1978, China has followed the American playbook on steroids. It has powered through the largest and fastest industrialization in history. Its companies enjoy the advantages of infrastructure, cheap financing and political support. Therefore, they have been able to achieve economies of scale. As a result, Indian companies have been blown away. An India-China decoupling might give sectors from aerospace components to advanced pharmaceuticals a second chance.

      Third, Chinese imports into India are nice-to-have, not must-have, goods. Demand for them is elastic unlike the inelastic demand for energy from the Middle East and the US. An India-China trade war that leads to a decoupling of the two economies could lead to short-term pain but has a strong rationale for the longer term.

      The Shape of Things to Come

      In any case, experts forget that India is unlikely to turn entirely inward as it did after independence in 1947. Recently, billions of dollars have poured into India from the US. Reliance Jio, an Indian mobile internet company, raked in $15 billion in 10 weeks. This is indicative of a deeper trend. Given new geopolitical imperatives, India is now looking to boost economic ties with friendly powers. It wants Korean, Japanese, European and American firms to set up shop in the country. Foreign market players who can act nimbly would be in a good position to grab some of the approximately $60 billion China’s trade surplus with India. There are new investment, manufacturing and trading opportunities emerging as the status quo changes and a new order emerges.

      Many economists predict a short-term price shock as Chinese goods stop coming into the country. They forget that India has struggled with jobless growth even during the best of times. Decoupling with China could boost domestic manufacturing not only for large but also for medium and small industries. This would increase employment, tax revenues and even demand thanks to a multiplier effect. Improved job figures further increase political support for decoupling and decrease India’s need to subsidize agriculture so heavily. For decades, agricultural subsidies have put pressure on public finances. If a lower amount is spent on subsidies, pressure on the fiscal deficit would abate.

      To sum up, India has strong reasons to decouple and no longer consider WTO rules sacrosanct. A tectonic shift is underway. After World War II, a new rules-based order emerged. The end of the Cold War strengthened this order and led to visions that Western democracy was the final destination for all societies. With polarization and partisanship at home, Western democracies themselves are in peril. The order that emerged in 1991 is crumbling and a new one is about to emerge. History offers us lessons as to what to expect.

      In the past, India and China focused on their spheres of influence with the Himalayas keeping them apart. Both prospered. In this age of trade, peace and prosperity, a Chola empire based in the modern-day southeastern state of Tamil Nadu ruled Malaysia (Putrajaya), Indonesia (Srivijaya), Sri Lanka and the Maldives. The Middle Kingdom held sway over Mongolia, Korea and Japan. Both India and China could go back to sticking to their historic spheres and to trading with each other.

      At the moment, China has followed salami tactics and encroached on territory India claims as its own. China has also been meddling in Nepal, Myanmar and Sri Lanka, India’s key neighbors. Since  1963, China has been in a close alliance with Pakistan. Yet China has never played a role in the Indian subcontinent and cannot suddenly turn into an overlord here. Therefore, close India-China economic ties no longer make strategic sense.

      Additionally, China disingenuously claims to meet India halfway while insisting that the onus to improve the border situation lies entirely with its neighbor. This is a one-way, not halfway, diplomacy that suggests aggressive intent. The Chinese also seem determined to win the war of narratives and are enlisting the support of free market ayatollahs to do so. It is only natural that the Indian narrative is bound to be different. It is in sync with the new realities of the day, which drive India’s decision to decouple its economy from China. Trade, investment and deep economic ties are a jolly good thing with allies and friends, not with rivals and foes.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More