Editorial 1 : The trade debate
Introduction: After years of negotiating, in November 2019, India chose to stay out of the Regional Comprehensive Economic Partnership (RCEP) — a trade agreement that includes 15 countries accounting for 30 per cent of global GDP, and around a quarter of world exports.
Arguments for not joining RCEP
- The argument was that staying out of such trade agreements, not being deeply integrated with the global value chains that run through these regions, was difficult to reconcile with the objective of becoming a global manufacturing hub, capturing export opportunities and foreign capital.
- There were concerns that the protectionist impulses that seemed to guide policy, tariff and non-tariff barriers, and other country-specific limitations would restrict the gains that could potentially flow from the escalating trade tensions between China and the US, and the China plus one strategy.
The recent Oxford Economics report: An eye opener
- As per a recent report by Oxford Economics, while India has “benefited from US trade rerouting away from China”, the gains have been to “a much lesser extent” when compared to other Asian countries such as Vietnam, Indonesia and Malaysia.
- Further, the report points out that the country has “not been able to attract a notably greater portion of global foreign direct investment, even as FDI flows to China plummeted”.
- In this context, the recent comments by the CEO of Niti Aayog, BVR Subrahmanyam on trade agreements, are welcome.
The rethinking in India’s trade policies
- BVR Subrahmanyam has said that India is missing out on the “China plus one” opportunity and that it should consider joining agreements such as the RCEP and the Comprehensive and Progressive Agreement for Trans Pacific Partnership.
- In principle, this is the right approach.
- Even countries like Sri Lanka and Bangladesh are looking to join the trade bloc.
The emerging concerns
- Five years later, the world is a different place.
- The intervening years have seen a pandemic, the Russia-Ukraine war, and a growing conflict in the Middle East.
- Supply chain disruptions have been frequent, and western countries, particularly the US, have lurched towards protectionism.
- Trade policy is now guided, more, by geopolitical and security considerations.
- Donald Trump’s victory in the recent presidential elections has further sparked uncertainty about the direction of US trade policy -Trump has advocated for a 60 per cent tariff on imports from China, and 10-20 per cent tariff on other imports.
Way forward for India
- In this fast-changing milieu, India must reevaluate its trade policy.
- While the country has since signed some trade agreements with countries such as the UAE and Australia, progress on others, such as the agreements with the EU and UK, has been slow.
Conclusion: Subrahmanyam’s comments, which perhaps indicate some rethink within the government. As India navigates a rapidly evolving geopolitical environment with a second Trump presidency set to unfold, Subrahmanyam’s views call for a wider debate.
Editorial 2 : Why Delhi must reach out to Jakarta
Introduction: On October 20, a vital maritime neighbour of India, Indonesia, saw a potentially climactic power transition. The avowedly nationalist Prabowo Subianto succeeded the affable Joko Widodo as president, with the latter’s son Gibran Rakabuming Raka providing continuity as vice president. Despite the early historical ties with Indonesia, it remained at the backwater of Indian diplomacy.
Why it is crucial for India to approach new Indonesian administration?
- China is the first country President Prabowo is visiting, despite a Chinese coast guard ship having intruded into Indonesian waters on October 26.
- Prabowo’s relations with the US remain wary because of his human rights record.
- India must embrace President Prabowo before yet another key neighbour joins the Sinosphere despite Indonesian wariness about China’s overbearing business and geopolitical influence.
President Prabowo is legatee of key political family of Indonesia:
- Prabowo belongs to a storied but controversial family.
- His father Sumitro Djojohadikusumo was the only person to have served as a senior minister in the cabinets of both Sukarno (1945-1967) and Suharto (1968-1998).
- Since Suharto undid almost every aspect of Sukarno’s regime during his reign, it required great political deftness to serve both.
- Prabowo’s grandfather Margono Djojohadikusumo founded Bank Negara Indonesia.
- It briefly served as the central bank of Sukarno’s nationalist regime, which the Dutch colonialists tried to overthrow between October 1945 and December 1949.
- Sumitro, with a fresh economics doctorate from the Netherlands, became Indonesia’s first representative to the UN in 1946.
The intertwined history of India and Indonesia
1. Bandung Conference (April 1955):
- It was hosted by Sukarno, it was a precursor to the Non-Aligned Movement (NAM), with India and Indonesia playing key roles in its creation.
2. Late-1950s Turmoil:
- Sumitro, a key Indonesian figure, fell out with Sukarno and led a CIA-backed separatist rebellion in Sumatra, one of several CIA attempts to overthrow Sukarno.
3.US Support for Sukarno’s Independence (1948):
- In response to a communist coup attempt against Sukarno, the US (under President Truman) backed India’s support for Sukarno, contributing to the final Dutch departure in December 1949.
4.US Opposition to Sukarno:
- The Dulles brothers (CIA and State Department under Eisenhower) viewed Sukarno as a threat to anti-communist objectives in Asia.
5. 1965 US-Backed Coup:
- Documents declassified in 2017 confirmed that the October 1965 coup, which replaced Sukarno with Suharto, was US-backed, marking a key Cold War victory for the US in Asia.
6. Prabowo Subianto’s Rise:
- By the end of Suharto’s three-decade rule, General Prabowo Subianto (Suharto’s son-in-law) was set to become military chief, leading strategic military units in Indonesia.
7. Prabowo’s Fall from Grace (1998):
- After Suharto’s ouster, Prabowo fell out of favour with the West due to alleged atrocities during the East Timor independence struggle and the 1998 anti-Suharto riots.
8. Economic Troubles (1997-98):
- Prabowo’s brother-in-law and others were implicated in Indonesia’s financial crisis due to excessive lending and collapsing businesses.
9. Prabowo’s Political Comeback:
- After exile, Prabowo and his brother Hashim rebuilt their business fortunes, with Hashim becoming one of Indonesia’s wealthiest individuals.
- Prabowo’s party, Gerindra, became the third-largest in parliament, and he was appointed as Indonesia’s defence minister by President Jokowi in 2019.
The significance of India-Indonesia relation
India-Indonesia Relations (Post-Suharto):
- Relations were strained during Suharto’s rule, especially after India tilted toward the USSR in 1971.
- Post-Suharto presidents, including Abdurrahman Wahid and Megawati Sukarnoputri, sought to strengthen ties with India, especially due to maritime disputes with China.
- Strong ties developed during President Jokowi’s tenure, including collaboration on the strategic port of Sabang and potential joint naval facilities.
Indonesia’s Economic Significance:
- Indonesia is a major exporter of thermal coal, rubber, palm oil, nickel (essential for EV batteries), and tin, aligning with India’s expanding manufacturing sector.
- There are growing opportunities for India’s service professionals to assist in reducing Indonesia’s business costs.
Deep Civilizational Links:
- Despite its turbulent modern history, Indonesia shares deep cultural and historical ties with India.
- The Arjuna Wijaya statue, built by Suharto in Jakarta, symbolizes these connections.
Conclusion: To strengthen ties with Indonesia and avoid losing its influence in the region to China, India should actively engage with Indonesia, leveraging the natural bonds between the nations. India can play on its strengths of having historical, cultural ties, at the same time largest emerging fast-growing economy to boost trade ties with Indonesia.