Sunday, November 1, 2009

Talking trade

Beijing Review, the influential and official weekly news magazine, has become the latest vehicle for public diplomacy between China and India. Just this attempt to talk about trade on a public platform is a very welcome step.

In an article titled, "Stumbling Blocks for China-India Trade", on 17 Sept 2009, excerpts from a report on bilateral economic relations by Economic Information Daily was published. Below is the response of the Indian embassy in Beijing, published on 1 Nov 2009.

While China India trade has grown rapidly, in the past seven years to over $ 51 billion in 2008, this is less than 2% of China's total foreign trade volume, and less than 6% of India's total. An article in the influential and official news weekly, Beijing Review, on Sept 17, 2009, outlines some of the problems on the economic and political front that it believes affecting relationship between the two neighbours. Statistics from China's Ministry of Commerce show that, in the past seven years, Chinese-Indian trade volume has enjoyed an average annual increase of 45 percent. Among all of China's main trade partners, India retains the highest growth rate in trade volume with China.
  • - Indian exports to China, it has been noted, are mainly primary products, with minerals and agricultural products representing more than half the total. By contrast, Indian imports are largely machinery products, chemical products, metal products, fibers and textiles from China.
  • - Indians export to China are resource-intensive, or labor-intensive products, while what they import from China are manufactured goods with high added value. This trade structure, in turn, leads to a limited market share of Indian goods in China and a great risk of trade deficit.
  • - When it comes to trade protectionism, India is a forerunner around the world. Except an average duty of nearly 30 percent on manufactured goods, India keeps a series of extra charges, coupled with complicated non-tariff measures.
  • - India's domestic investment atmosphere features onerous administrative interventions, excess formalities and low efficiency—factors that could hinder the further development of Chinese-Indian economic and trade relations.
  • - Anti-dumping investigations covered a wide range of goods, including industrial salt, iron and steel, auto parts, coal products, porcelain, textiles and rubber products, which led to a total loss of $1.5 billion for Chinese merchants.
  • - India imposed a ban on Chinese toys, and has also imposed safeguard tariffs on Chinese goods, such as aluminum shields.
  • - The sea route between the two countries is long and costly. While the land route, through Myanmar and Nathu La, are being reopened, the conditions are very poor.
  • - Bilateral understandings between Beijing and New Delhi are far from sufficient due to their limited exchanges, mutual trust is superficial and, in ways, fragile.
  • - Indian fear of China's rapid development, along with an aversion to Chinese products, has diminished the Chinese market in India.
  • - Some Indians are wary that China's cooperation with Pakistan, might be a threat, thus prompting them to hold a defensive posture.
On Oct 29, 2009, the Indian Embassy in Beijing, responded to the above article in "Striving for win-win solutions"
  • - The two countries should realize that each "has a vested interest in the success of the other" before they can jointly create a bright future.
  • - When it comes to political trust, few can dispute that the two countries have come a long way in the last two decades. The frequency of contacts at the leadership level is unprecedented.
  • - During Chinese President Hu Jintao's visit to India in November 2006, the two countries set themselves a bilateral trade target of $40 billion by 2010. This was reached two years in advance, in 2008.
  • - Trade imbalance between China and India is indisputable. Indian exports to China are mainly primary products while Chinese exports are largely manufactured goods with high added value.
  • - India manufacture value-added goods like electrical products, machinery, plastics, organic chemicals, chemical products and iron and steel, but it actually has penetrated the Chinese market in a very limited way in each of these categories. Restricted market access and tariff/non-tariff barriers have limited the scope for growth.
  • - Local content stipulations have also constrained India's ability to compete in the Chinese market.
  • - Sharp increases on import duties of completed equipment have obviously had their intended impact.
  • - On October 11, India decided to terminate safeguard investigations against the import of passenger car tires from China.
  • - Despite a memorandum of understanding on the application of phytosanitary measures concluded in 2002, China has provided India with market access to only three out of 17 varieties of fruits and vegetables that had been sought.
  • - The real limitation is the old mindset that views bilateral relations as a zero-sum game, rather than striving to create win-win solutions. It is when each country realizes that it has a vested interest in the success of the other that we can be truly confident of our joint future.

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