Commercial Challenge of India | Editorial HT – editorials
A structural challenge in Indian foreign policy continues with the current government: the inability to seal trade agreements. In three months, New Delhi failed to close two agreements, the Regional Integral Economic Association (RCEP) and a trade agreement with the United States. Undeterred, India has reopened trade talks with the European Union and has several bilateral trade agreements in its sights. But it is not clear if these talks will result in pacts. India, initially without design and now increasingly due to inconsistency, has not finalized a trade agreement for more than half a decade. The failure to close the US trade agreement is particularly revealing. According to commercial standards, it was a relatively small business, worth a few billion dollars. Both parties wanted to reach an agreement due to bigger strategic concerns and the pressure of a pending presidential visit. However, negotiators failed to reach the goal.
Regardless of whether India was right to stick to its “red lines” with the United States in the trade agreement, there is a broader and more disturbing pattern. India’s inability to finalize trade agreements is undermining its claim that it will keep the World Trade Organization crumbling. Their Act East and Neighborhood First policies are effectively being applied to one leg due to the absence of a commercial item. India is experiencing a slow but steady loss of export earnings, as other countries negotiate to remove the participation of Indian companies in the foreign market. Although foreign investment continues to flow to the country, very little is directed towards manufacturing and the sectors that are linked to global supply chains. In contrast, exports are driving Bangladesh and Vietnam to grow at enviable rates.
The failure to draw up trade agreements shows other flaws in the commercial approach of India. One, the ministry of commerce lacks the authority to nullify the numerous pressure groups of industry and labor that favor protectionism. It is necessary to institutionalize a structure that manages these forces. Two, the future of international trade will revolve around technological standards and digital policies. The underlying current of technological nationalism that defines the policies of this government will mean an inevitable and potentially dangerous conflict with the United States. Washington has requested an extensive dialogue on these issues with New Delhi. There are few reasons for India not to accept this. Third, if the international trade regime is fragmenting into a mosaic of plurilateral and bilateral agreements, India, which lacks such support agreements, will suffer the most.