Trade as strategy: Chinese lessons

By C. Raja Mohan

CONSIDER THE following paradox: China is a closed society with an open mind and India is an open society with a closed mind. By the classical definitions of political science, communist China is a ``closed'' political system at the heart of which is the one party-state. India in contrast is an ``open'' society built on a democratic and plural political order. Yet China today is more open and globalised than India is.

In just one generation, China's reforms have produced one of the world's largest economies. On that basis China has become the second most powerful country in the international system. A decade after the launch of reforms, India remains mired in self- doubt. It is unwilling to make a clean break with the past and seek power and prosperity as China has done.

The Indian political class justifies the slow pace of reforms in the name of democracy, and the difficulty of generating consensus on complex policy issues. It is implied that the absence of political pluralism in China makes it easy for the communist party there to press ahead with necessary but unpopular reforms. Democracy or the lack of it can only explain a small part of the reality in India and China. China might not have a democratic system; but it has a thriving culture of politics.

The communist leadership manages many competing interests within the party and outside. And Chinese politics in the last two decades has been about defining the pace and direction of its reforms. The Chinese communists had to reconcile the imperatives of economic change with the opposition from sectoral interests. They had to bend ideology to fit the policy requirements. They buried past slogans and invented new ones to suit present realities.

Equally important has been the unfinished Chinese debate about the tension between `modernisation' and `westernisation' and finding the right relationship between China and the West. The very same issues are at the heart of the politics of reform in India. The very different outcomes in India and China are the result of the quality of political leadership. Nothing else explains the paradox that India and China have come to represent.

The Chinese leadership, following the debacle of the cultural revolution, acknowledged by the end of the 1970s the need for unadulterated modernisation of China by drawing closer to the West. Despite the ravages from decades of state-led socialism, India continues to pretend that the old order works. Indian leaders have preferred to tinker with the old order rather than radically reform it. In the pursuit of long-term national goals, the Chinese leadership has been willing to take difficult decisions; the Indian leadership has been reluctant to bite the bullet.

Trade related issues reveal the sharp contrast between the Indian and the Chinese world views in the recent period. China has pursued international trade as a means to expand national prosperity and raise its international stature. India treats trade as some kind of necessary evil that must be controlled with the full force of state power. There is communist China engaging in difficult negotiations with the entire international community to find an entry into the World Trade Organisation. Here are the Indian ideologues - of the ruling party on the right as well as the left in the Opposition - suggesting India could walk out of the global trading system.

Consider too China's support for a new round of trade negotiations. In contrast, India insists it will not allow a new round. There is China, wanting to legitimise its place as one of the world's great trading nations. Here is India deluding itself that it can prevent the next trade round. And who is there behind India in the debate on WTO? Pakistan! What terrible company to keep on global trading issues!

Indian political leaders keep harping on the threats from globalisation. What about China? It is not that China has no problems. Globalisation will force China to break the iron rice bowl, disband its large state-owned enterprises and radically reorient its agriculture sector. China recognises there is no other way to go. It is prepared to address the challenges of globalisation by leveraging its strengths. If China is pragmatic in its approach, India remains ideological. New Delhi adopts unrealistic postures, and is caught defending them to the last. In the end, India is dragged kicking and screaming into accepting inevitable realities, as in the Uruguay Round a decade ago.

China has also sought to use trade levers to dampen the negative trends in its relations with the United States. India believes trade policy is part of the long-proclaimed jehad against the industrialised North. Instead of building on the emerging convergences with the U.S. on trade issues, it has made fighting over trade differences a matter of national honour.

Look at China using its economic relations with the U.S. to undermine the initial ideological hostility of the Bush Administration. It has mobilised its corporate allies in the U.S., offering commercial enticements (the latest is an order to purchase 36 Boeing commercial jets) that translate into jobs in the U.S. Beijing has already got the Bush Administration to move away from the threatening formulation that ``China is a strategic competitor''. It is a matter of time before the confrontation between the two yields to business as usual.

In contrast to China, India appears hesitant to build on the emerging political good will in the U.S. For the first time in decades, there is an Administration in Washington that is willing to acknowledge India's global role and lay the foundations for a strategic partnership. Instead of using trade policy as an ideological argument against the U.S., India should be using opportunities on the trade front to consolidate the political ties with America. No one expects India to work against its own interests; but every one hopes New Delhi will demonstrate a little bit of pragmatism in pursuing them.

Even if a future American Administration were to send out invitations for a containment party against China, there may be few takers in Asia. China's expanding economic ties with its neighbours have raised the stakes for Asian nations in a cooperative relationship with Beijing. As the new engine of economic growth in East and South East Asia, China is all set to consolidate its political and strategic primacy in the region.

It makes eminent sense for India to similarly consolidate its primacy in the subcontinent by letting the forces of trade and globalisation work to its advantage. Imaginative Indian policies would help the region integrate economically under the compulsions of globalisation. Instead of letting expanding economic flows douse the political difficulties in the subcontinent, India has allowed petty considerations to undermine its long-term strategic objectives in the region. Here is Bangladesh all set to integrate into the Indian economy. Nearly 90 per cent of the trade between the two nations is constituted by Indian exports to Bangladesh. Yet India refuses to offer any serious duty concessions to Bangladesh and even those few announced are not implemented.

China's experience shows trade can be a powerful instrument in promoting national prosperity, regional clout and international standing. If India is to emulate China, it needs to liberate its trade policy from the clutches of old ideological slogans and bureaucratic practices. And trade is perhaps too important to be left to a single Ministry. The Government needs a mechanism that can make diverse interests work together in making India a major trading nation in the coming decade. The most important component of that must be the creation of a human resource pool that is capable of assessing the global economic environment, negotiating effectively in multilateral forums and integrating trade policy with foreign and national security objectives.

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