India china border issues – how can India maintain balance between conflict & trade relations? is make in India a solution, even as raw materials are supplied by china

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With the similarity in geography, climate & colonial history India & China share bilateral ties since the ancient historical period, especially after the spread of Buddhism. There used to happen various cultural exchanges, people to people contact & bilateral trade. This saga was continued even today with more vigour with a catchphrase “Hindi-Chini bhai bhai”  & the addition of military exercises. However, the relations were not free from border issues. There occurred some major border tussles like 1962 war, 2017 Doklam stand-off & the recent clash between security forces near LINE OF ACTUAL CONTROL (LAC) in Galwan valley.

 The major tussle between India & China were the result of unsettled border disputes. There were contradicting border lines as per Johnsons line, McDonald line & McMohan line. Aksai Chin is the main conflicting region through which LAC passes through, which China claims as part of Xinjiang province. Similarly, the north east frontier i.e., Arunachal Pradesh is also a conflicting area, which China claims as a part of Tibet.

The recent tussle between the two armies near the LAC region have escalated the tensions between the two nations. It led to the furtherance of protectionist policies adopted by India, like blocking of FDIs in border road construction projects, government approval for FDIs over Rs. 200 crore coming from neighbours (focused on China), & the most controversial ban of 59 Chinese apps in India. Government of India (GoI) is also thinking of boycotting Chinese imports through its “AtmaNirbhar Bharath Abhiyan (ANBA)” scheme. And there arises a demand for boycotting Chinese goods throughout the country.

Balance between conflict & trade :-

  While openness to trade doesn’t automatically prevent war, there’s a greater risk of conflict when countries grow less economically dependent on each other, as appears now be happening between India & Pakistan. The case in point is that, India is importing lot of goods & services from China to run the economy. For example, to fulfil its renewable energy targets India is importing nearly 90% of solar equipment since past 3 financial years from China. Similarly, India is importing 80% of Active Pharmaceutical Ingredients (API) from China, which is the cheapest exporter of APIs & most of India’s MSME sector is depending on cheaper Chinese raw materials to run their units economically.

  In this scenario, trade war with China, as an outcome of patriotic feelings raised due to the border tussles, is not the right step forward, as suggested by most of our economists. Any attempt to reduce imports from China through tariffs or other non-tariff barriers, will raise prices for Indian consumers i.e. we need to pay more for smart TV, mobile phones, car, air-conditioner. India also imports capital goods and intermediate products from China, such restrictions will affect domestic manufacturing competitiveness, and thus further erode the country’s export competitiveness. Moreover, in the short-run, ensuring uninterrupted alternative supplies may not be a feasible option.

There is also the issue of Chinese investment in the Indian start-up space to contend with. Companies like Alibaba and Tencent have invested in “unicorns” such as Zomato, Paytm, Ola cabs and others. Even though Make in India & ANBA are good initiatives, the blanket ban on trade with any country will hurt the nation’s economy & the dependent people’s livelihood adversely.

As discussed earlier, we should increase the trade relations coupled with cultural exchanges & people to people contact to bring peace between the countries. India should rejuvenate the principles of Panchasheel, as well as the Bandung spirit of solidarity, friendship, & cooperation. It should use its soft diplomacy to settle the border issue, as was done in the case of Bangladesh (exchange of border enclaves). India should maintain a balance between its relations with USA & China, which are adversaries to each other. We shouldn’t fall into the trap of western countries, which are trying to downgrade China. It may create animosity between India and China. 

 

We’ve to calculate the loss to our economy before launching any blanket ban on trade with China, if China too replicates our action. Obviously, it’ll cost India severely when compared to China. Also, we’ve to keep in mind the WTO rules & regulations. If India wants to become global power, it should respect the international laws as well, unlike China. India should pursue the Chinese government to allow the export of Indian generic medicine, as well as our service sector personnel to bridge the burgeoning trade deficit, which is around $50billion & is one of the factors of protectionist policies of India.

 

It is to be understood that that turning a border dispute into a trade war is unlikely to solve the border dispute. But, it doesn’t mean that India should put aside its pride and act like a soft state. Hence, Boosting manufacturing sector beside avoiding a knee jerk reaction till the time we get Self reliant seems to be the profitable way forward. At this moment, it’s particularly important to revisit the original aspiration of establishing diplomatic relations 70 years ago & carry forward the spirit of good neighbourliness & friendship, unity & cooperation- otherwise the next fight will be still more serious.  

-Naveen G