Summary:
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In COP26, by offering to do more than what was expected out of it, India disarmed its critics from the Western countries while voicing the concerns of the South.
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India should do the same in protecting its geo-economics interests without sacrificing its geopolitical interests.
Why India is standing alone at WTO?
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Criticism on India’s Protective Trade policies:
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South countries does not support India at WTO as they do in COPs.
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India’s inclination towards protectionism, accompanied by the raising of average applied tariff over the past four years, as part of its ‘atmanirbharta’ agenda is criticised by both countries of the North and the South.
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Criticism on India’s policy stands on foreign trade: India’s criticism of free trade agreements entered into by the previous government and the decision to withdraw from the RCEP, distanced India from many newly industrializing economies seeking greater market access to India.
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Loss of status amongst developing countries: India has also been losing its longstanding status as a champion of developing country interests in multilateral trade negotiations.
What have been the implications?
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Geo-economic consequence: Further weakening of the India-Africa compact that defined WTO discussions at least till 2008.
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Impact on Exports: With India opting out or being left out of all major plurilateral and regional FTAs, exports, despite recent growth, have taken a setback. Exports remain static in nominal terms over the past decade and actually shrinking by 20-30% in real terms.
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Driving out FDI: Most foreign direct investments coming into India are aimed primarily at the domestic market. Export-oriented western FDI continues to leave India, going to countries to India’s East.
How India’s position on geo-economic challenges differs sharply from its position on geopolitical challenges?
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Indian position on geo-economic challenges like climate change, trade, and industrial policy differs sharply from the clarity with which it has been dealing with geopolitical challenges.
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While China’s geopolitical and geo-economic aggression has pushed India closer to West with respect to defense and security ties, India’s economic interests continue to place it in the middle of the North-South economic divide.
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This dichotomy between India’s geopolitical and geo-economic interests is also reflected in the agenda of the two Quads of which it is a member.
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While geopolitics of China’s rise defines the agenda of the East Asian Quad (Australia, India, Japan, and the US), the geoeconomics of trade, manufacturing, and technology define the West Asian Quad (India, Israel, UAE, and the US).
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India is now engaged in negotiating FTAs with members of both Quads and with the European Union, especially France, Germany, and Scandinavia.
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The challenge for India is to balance its geopolitical interests, along the East-West axis, with its geo-economic interests along the North-South axis.
What is the way forward?
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India needs to balance its geopolitical interests, with its geo-economic interests. For this there has to be greater coordination between the external affairs and commerce ministries
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New messaging on climate action should also define India’s approach to foreign trade.