Suchak Patel asked: How the US-China trade war is a challenge as well as an opportunity for India? What precautionary steps should India take to safeguard its interests?

Raviprasad Narayanan replies: The US-China trade war is to be seen as an expression of “irrational exuberance” (Alan Greenspan, former US Federal Reserve chief) on the part of US President Donald Trump appealing to a domestic audience. The US President by adopting a ‘strong’ posture towards China and walking out of the United Nations Framework Convention on Climate Change (UNFCCC) represents a dynamic about turn and unpredictability long the methodology followed by rulers deposed by the US.

The trade war between the US and China has shades of multi-level negotiations woven with trade and access being negotiated beyond the World Trade Organisation (WTO). For now, China is playing a waiting game by imposing lesser sanctions on the US and hoping for a ‘regime change’ at the White House in 2020, so that by 2021 when Xi Jinping and the Chinese Communist Party (CCP) celebrate the centennial of the Party, China can leverage political centrality at home to an advantageous trade bilateral with the US.

India has very few options since foreign policy appears to be in stasis. The US-China trade war is not something India can benefit from since an ‘inward’ turn pre-dominates US politics at home and the ‘globalist’ turn being reversed by pulling out from UNFCCC, etc. The choice India has, is to play a dynamic role in the South Asian Association for Regional Cooperation (SAARC) and be the leader of the region in economic terms by crafting free trade agreements (FTAs) with member states. China is only an observer in the SAARC. By allowing this multilateral institution to not evolve in economic terms only creates space for China to prevail with its One Belt One Road (OBOR) and the China-Pakistan Economic Corridor (CPEC) while India gets sidelined.

The US-China trade war will in due course go through a phase of course correction and the only opportunity we have is by not taking sides and establishing ourselves in developing world economies with our expertise especially in information technology (IT), pharmaceuticals and education and not be fixated on advanced economies where domestic politics changes every few years. The US-China spat is stemming from domestic politics in the former and appealing to an audience not comfortable with the growing salience of China to global trade at the expense of the US. 

Dr. Raviprasad Narayanan was Associate Fellow at IDSA. He is currently Associate Professor at Centre for East Asian Studies, Jawaharlal Nehru University, New Delhi.

Posted on November 12, 2018