Date: 20/09/2022

Relevance: GS-2: India and its neighborhood- relations; bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Key Phrases: Free trade agreements, bilateral and multilateral trade agreements, foreign trade in Asia-Pacific, Indo-Pacific Economic Framework (IPEF), and Regional Comprehensive Economic Partnership (RCEP)

Context:

• In recent times India has been active in the geopolitical developments in the Indo-Pacific and has managed to emerge as a major pivot of the global Indo-Pacific strategy, manifested by its role in the Quad and its cooperation with the ASEAN countries.

Why is India taking geopolitics and geoeconomics separately?

• Today India seems to lack a vision for the Indo-Pacific in the long term as it hasn't focused on the geo-economics of the Indo-Pacific despite the fact that modern geoeconomics is the foundation of geopolitics.
• Even though India is an active partner in the Indo-Pacific and Quad, it still has not joined the region's key multilateral trading agreements.
  • For example: India’s refusal to join the trade pillar of the Indo-Pacific Economic Framework (IPEF) while deciding to join the three other pillars of the IPEF - supply chains, tax and anti-corruption, and clean energy.
• India’s move to stay out of IPEF, two years after it walked out of the negotiations on the Regional Comprehensive Economic Partnership (RCEP) is surprising.
  • These agreements lay at the heart of the Indo-Pacific and could potentially shape the economic character of the broader Indo-Pacific region.
  • It is also in contravention of the government’s recent policies of pushing for foreign trade agreements.

What is QUAD?

• About
  • It is the grouping of four democratic countries –India, Australia, the United States, and Japan.
  • The idea of Quad was first mooted by Japanese Prime Minister Shinzo Abe in 2007.
    • However, the idea couldn’t move ahead with Australia pulling out of it, apparently due to Chinese pressure.
  • In 2017 the idea materialized when India, Australia, the US, and Japan, came together and formed this “quadrilateral” coalition.
• Significance
  • All four nations find a common ground of being democratic nations and also support the common interest of unhindered maritime trade and security.
  • The Quad is billed as four democracies with a shared objective to ensure and support a “free, open and prosperous” Indo-Pacific region.

Is India favouring bilateral trade agreements?

• The current government in its first term was skeptical of free trade agreements and thus showcased lack of policy interest in promoting external trade and engaging in free trade negotiations.
• In the wake of COVID-19 it changed its stand and now is pushing for foreign trade agreement aggressively.
• India concluded a free trade agreement with the United Arab Emirates earlier this year.
  • India has signed Early Harvest Agreements with Australia and the United Kingdom and several more agreements are being negotiated.
• The recent decision to stay out of the IPEF shows a clear policy of India that it favours bilateral agreements, and is not keen on multilateral, plurilateral and even soft agreements such as the IPEF.

A regressive step and many challenges of opting out of multilateralism

• Although India has its own concerns regarding the multilateral trade agreements, its policy of staying out of various regional trading agreements is a regressive policy decision.
• The absence of the world’s fifth largest economy (India) from various regional trading platforms will invariably boost China’s geo-economic hegemony in Asia.
  • China’s share in global trade today is 15% and India accounts for about 2%
• For India, it would be hard to integrate itself into the regional and global supply chains without being a part of important regional multilateral trading agreements.
• Addressing the deeper challenges plaguing the investment and business environment in India is not possible without joining some of these multilateral trading arrangements
  • It is evident from the fact that firms leaving China have gone to Vietnam.
• India’s maritime security will take a toll in absence of economic stakes of regional countries in India.
  • Without creating economic stakes with the states of the region, India’s ‘Act East’ policy will revert to its earlier avatar - ‘Look East’.
  • It is also important for India to become part of trading arrangements which have major non-regional states so as to become a major part of the region’s supply chains.

China challenge will still prevail

• India’s concern of China dominating the Indian market and weaponized by China for geopolitical purposes is a reason for not joining Regional Comprehensive Economic Partnership (RCEP) and other such trade agreements.
• But India needs to face it because even despite the military stand-off on the Line of Actual Control, India-China trade has only increased in the past year.
• The less India engages with the region economically, with China doing more, India might risk getting economically isolated in the broader region.

Rethinking India’s geo-economic choices is the way forward

• India should rethink its geo-economic choices to enhance its geopolitical influence in the region.
• It should reconsider its decision and rethink on the trade pillar of the IPEF, and its decision of not to join the RCEP
• It may seek to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) from which the U.S. walked out and China is seeking to join.
• Even if India doesn't want to allow trade with China, India should start with the IPEF and the CPTPP, both of which do not have China as a member
• India should also proactively lobby to become a part of the Minerals Security Partnership, the U.S.-led 11-member grouping to secure supply chains of critical minerals.

Conclusion

• If India seeks to be a part of the Asian century and its economic growth story it must let go of its historical hesitations and phobias regarding multilateral trading arrangements.
• Therefore the need of the hour is to change its current policy of pursuing geopolitical ends without geoeconomic engagements.

Source: The Hindu

Mains Question:

Q. “Geoeconomics cannot be divorced from geopolitics” How India can achieve its geopolitical goals through a policy of liberal geoeconomic engagements in Asia-Pacific? What are the challenges and solutions thereof, Discuss in light of the above statement (250 words).