Round The World
New Delhi, 7 October 2014
New Foreign Trade
Policy
FOCUS ON LATIN
AMERICA, AFRICA
By Ashok B Sharma
India’s foreign trade has badly suffered
since August-September 2008, the beginning of the global financial crisis and
the subsequent sovereign crisis shock in Euro zone. Wherein, exports and
imports growth trends became erratic with the changing situation. After a
negative trend in export growth (-1.82%) in 2012-13, the performance improved
to 4.66% in 2013-14. But imports dipped to -8.26% in 2013-14 from a low base of
0.29% in the previous year. Trade balance remained negative at $1,35,794
million.
Notably, growth in exports is
maintained in the current fiscal (April-August 2014) growing at 7.31%. to
$1,34,798 million. However, increase in imports turned negative by 2.69% with
$4,50,200 million trade balance improved but still remained negative at $56,151
million. With the manufacturing sector picking up capital goods imports of
machinery and key raw materials are likely to rise. But services enjoy a positive
trade balance.
Pertinently, over dependence on
markets in developed countries is the cause for exports shrinkage. As recovery
in developed countries leading to increase in demand is slow, India should
strengthen trade bonds with the developing and least developed countries.
Instead of pushing for Bilateral
Investment and Trade Agreement (BITA) which is fraught with problems like
intellectual property rights, agreements on dairy and pharma sectors, New Delhi
should look for more South-South cooperation and extend its outreach to new
non-traditional markets in Latin America, Caribbean, Central Asian republics,
Africa, small Pacific island countries and explore greater opportunities in
Russia for exports.
Indeed, energy-rich countries and
those endowed with natural resources can attract Indian investments and solve
the country’s energy security problem. Alongside, India
should focus on project exports to Africa, West Asia,
Central Asian republics and some ASEAN countries.
Specially as recovery in developing
countries is faster than the developed world. Bonds with these countries would
help India
to fight the developed world for a level playing field at WTO.
Particularly as trade has become an
integral part of diplomacy and with the Modi Government slated to come out with
a new Foreign Trade Policy for the next five years, it would be advisable the Commerce
Ministry works in close cooperation with the External Affairs Ministry while
evolving the new policy. Wherein, adequate incentives should be given for
export promotion to Latin America, Caribbean, Africa, Pacific
Islands, Central Asian republics and Russia.
Notwithstanding, India’s initial attempts to explore new export
destinations in South America and Caribbean
met with limited success. Already the Foreign Ministry has begun the process of
engaging with the Community of Latin American and Caribbean States (CELAC),
consisting of 33 countries representing 600 million people.
This group includes Mexico but excludes Canada,
US and French, Netherlands, Denmark and UK
territories in the Americas.
There are sub-regional groupings like Mercosur and the Andean with India should
engage
Recall, CELAC was created on
December 3, 2011 in Caracas, Venezuela to deepen Latin American integration
and to reduce the overwhelming influence of US on Latin
America’s politics and economics. This body is an alternative to
the Organization of American States (OAS), organised by Washington in 1948, ostensibly as a counter-measure
to the then-potential Soviet influence in the region.
Importantly, this is the right time
for India to step in as it
has close ties with regional power Brazil. Despite, a 20% decline in
exports to Latin America last year, the first quarter of the current fiscal exports
have grown by 35% from $2.1 billion to $2.9 billion, Brazil
saw 75% growth, Peru 25% and
Columbia 17%.
However, import restrictions imposed by Argentina are a cause of concern.
Interestingly, CELAC is diverse with
countries following different economic systems and trade policies. It has 18
Spanish-speaking countries, one each Portuguese, French and Dutch and 12
English-speaking countries. But, countries in the region want to move out of
the pre-dominant US
influence.
China is also engaging with Latin America wherein trade grew by 8% to $255.5 billion in
2012, faster than the 6.2% growth of the Continent's trade with the US. A UN
Economic Commission for Latin America and Caribbean study predicts Beijing will surpass the European Union as Latin America's second-largest trading partner in 2016. Others
forecast that in 15 years, China
will overtake the US to
become Latin America's largest trade partner.
Moreover, Chinese investment in the Continent's
energy and infrastructure sectors is rising rapidly, with more than $550
billion infrastructure projects. It is to be seen how effectively India plays its
diplomacy for boosting trade relations and energy imports in the region.
In Africa, India mainly engages through the African Union comprising
55 countries, sans Morocco
and some others suspended from membership due to political reasons. It would be
better for New Delhi
to engage with African regional groups rather than directly with countries.
Specially against the backdrop of overlapping
membership, 8 groups are recognised by the African Union like Arab Maghreb
Union (AMU), Common Market for Eastern and Southern Africa (COMESA), Community
of Sahel-Saharan States (CEN-SAD), East African Community (EAC), Economic
Community of Central African States (ECCAS), Economic Community of West African
States (ECOWAS), Inter-Governmental Authority on Development (IGAD) and
Southern African Development Community (SADC).
There are 8 other unrecognised groups
like the Economic and Monetary Community of Central Africa (CEMAC), West
African Economic and Monetary Union (UEMOA/WAEMU), Economic Community of the
Great Lakes Countries (CEPGL), Indian Ocean Commission (IOC), Mano River Union
(MRU), Southern African Customs Union (SACU), International Conference on Great
Lakes Region (ICGLR/CIRGL), Senegal River Basin Development Authority (OMVS).
Thus, it would be tactical for India
to engage with each of these groups.
Traditionally, New
Delhi has good trade relations with eastern, northern and southern Africa. It is time to give added focus for developing
greater trade relations with central and western Africa.
Prospects for engaging with sub-Saharan Africa
too look bright with good recovery in the region.
In its Look East Policy, India has already engaged substantially with
South-East Asia and East Asia. It is now time
to look further east and engage with the natural resource rich small Pacific Ocean islands. With Australia
and New Zealand partnering
these countries it should not be difficult to engage with Pacific Ocean Island
Forum countries with which New Delhi
enjoys Observer status.
Though Central Asian republics and Russia’s growth rate remain subdued, it is an opportune
moment for India
to engage with the energy-rich region endowed with natural resources. Clearly,
the recent EU and US sanctions against Russia
provides an opportunity for New Delhi
to regain its lost markets in specific products. ----- INFA
(Copyright,
India News and Feature Alliance)
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