Paper: GS – II, Subject: International Relations, Topic: India’s relations with major powers, Issue: India’s trade ties with US and China.
Context:
Recent progress in US-China trade negotiations (focused on tariff reduction and rare-earth trade) offers an opportunity for India to rethink its trade and GVC (Global Value Chain) strategy. India must stop treating its economic relations with US and China as isolated tracks and aim for an integrated and pragmatic policy.
Key Highlights:
Evolving US and China Trade Relations:
- Trade negotiations: US and China nearing a bilateral trade pact while US is simultaneously negotiating additional deals globally.
- Limited role of India: India not currently part of high-priority negotiations (e.g., deals with Japan, UK, EU). India faces risk of economic marginalization if it doesn’t adapt quickly.
India’s GVC Weaknesses:
India’s challenges:
Measures needed:
- Leverage opportunity: The US-China Pact provides a moment for India to reset trade policy. India needs to stop viewing US and China tracks separately and embrace a more flexible, integrated, and opportunity-driven strategy.
- Approach with the U.S.: India must secure market access, supply chain integration and leverage bilateral trade deal as catalyst.
- Address concerns: such as IT work visas tied to U.S. immigration politics and the need for IPR protection to build trust.
- Approach with China: India cannot ignore China’s centrality to Asia’s GVCs. It must simplify investment norms, reduce tariff disadvantages and push back against China’s discriminatory trade barriers.
- Realigning Trade Strategy:India must accept China as a key economic partner, despite geopolitical tensions and leverage U.S. market for goods and services.
- Rules and regulations: Tackle “no-go” zones for Chinese firms rationally (e.g., telecom, power) and provide clear rules and regulatory stability for investors.
- Market oriented reforms: in domains such as Infrastructure, local regulations and ease of doing business.
Conclusion:
India’s current trade policy is insufficiently aligned with evolving global realities.A dual-track strategy aligning both U.S. and China policy is essential.India must act before India is left out of global trade corridors.
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