Trade
Cross-border trade is the missing piece for India’s growth
Authors: Durairaj Kumarasamy and Manisha Nayyar, MRIIRS
The potential for cross-border trade between India and its neighbouring countries — Bangladesh, Bhutan, Nepal, Myanmar, Pakistan, Afghanistan and China — has not been fully realised. India’s formal cross-border trade with these countries was about US$2.48 billion in 2021 despite the US$115 billion trade potential. Only nine of India’s seventeen border states are actively engaged in cross-border trade.
This is due to political and security reasons, difficult geographical terrain for connectivity and growing informal trade which has stemmed from open borders in most of the northeastern region.
Borders with neighbouring countries are often not properly fenced and guarded, resulting in insurgency and illegal movement of goods and people. Most of the northeastern region, as well as Jammu and Kashmir, face insurgency issues. Insurgents take advantage of porous borders to escape from the army as they are internationally well-connected and have hideouts in neighbouring countries.
Another persistent issue is the undocumented cross-border migration from Bangladesh to India’s border regions, which results in human trafficking and other crimes. This has catalysed bilateral tensions between the two countries. The realities of the northeastern region pose a challenge to India’s open economic policy as conceptualised by the ‘Act East’ policy, which is currently oscillating between the need for basic economic development in the region and security constraints.
Despite these challenges, northeastern states possess the potential to leverage their strong ethnic and cultural ties with neighbouring countries to facilitate the trade of locally produced goods via border haats (local markets along borders) and other channels. These channels can create numerous employment opportunities for young people.
The proposed increase in border haats with Bangladesh, construction of new airports and the new PM-DevINE scheme (a regional development initiative) allow northeastern states to break the cycle of dependence on the central government.
Both the central and state governments have introduced many developmental and infrastructural initiatives, such as Bharatmala — an intra-national transport network to strengthen land route connections with neighbouring countries.
But despite these initiatives, northeastern states still face an infrastructural deficit. Poor road connectivity and a lack of bridges remain the biggest infrastructural challenge in the border districts of the state. Most villages do not even have access to tap water and electricity, and the Border Area Development Program does not have sufficient funds to fulfil the needs of border districts. Most borderlands lack basic amenities and employment opportunities, causing people to leave.
The central government’s flagship initiatives, Make in India and the Self Reliant India Campaign, are efforts to make India a manufacturing hub. Given that vision, regional integration should be at the top of India’s foreign policy agenda, because it would help overcome constraints to the flow of goods, services, capital, people and ideas — all of which are critical to delivering high economic growth.
The central government needs to increase budget allocations for infrastructure and development initiatives in the border areas to provide necessary facilities for local populations. State governments could establish Export Promotion Zones for border trade through Integrated Check Posts by providing institutional and financial support to local entrepreneurs. They could also initiate an institutional framework at the state level to boost local trade, with designated ministries identifying local challenges and strengths.
The role of sub-regional groupings such as the Bay of Bengal Initiative for Multi-Sectoral Technical Economic Cooperation (BIMSTEC) and the Bangladesh, Bhutan, India, Nepal Initiative in facilitating border trade in India cannot be ignored. These groupings help reduce trade barriers, harmonise trade policies, develop infrastructure, enhance cooperation and promote regional integration which are essential for facilitating cross-border trade.
BIMSTEC is in line with India’s ‘Act East’ policy, which seeks to foster greater regional cooperation in Southeast Asia. During the 2022 summit, Indian Prime Minister Narendra Modi urged BIMSTEC leaders to transform the group into a means of connectivity, prosperity and security — the three drivers of India’s regional diplomacy.
India considers soft and hard…
Trade
Self-Reliance and Openness: Core Principles of China’s Third Plenary Session
The Third Plenum communique from the CCP indicates a prioritization of stability and compromise in response to China’s economic challenges. It highlights the concept of Chinese-style modernization and establishes political guidelines for balancing regulation and market forces.
The CCP’s Third Plenum communique signals a focus on stability and compromise in the face of China’s economic challenges. It emphasises Chinese-style modernisation and sets political directions for balancing regulation and market forces. While not as groundbreaking as previous plenums, it acknowledges the importance of market mechanisms and technological self-reliance, aiming to address issues like high youth unemployment and private sector uncertainty. The communique seeks to navigate the complexities of global competition and domestic innovation, potentially reshaping global supply chains and trade dynamics. Overall, it presents a pragmatic blueprint for China’s economic future.
Source : Self-reliance and openness central pillars of China’s Third Plenum | East Asia Forum
Trade
Trade Prevails Over Political Persuasions in China-Germany Relations
China and Germany maintain a strong bilateral relationship, rooted in economic cooperation despite ideological differences. Recent visits and agreements focus on expanding trade and addressing mutual concerns, navigating challenges while nurturing ties.
Evolving Bilateral Ties
China and Germany share a strong bilateral relationship, rooted in history since 1972. This connection has seen moments of cooperation intertwined with periods of tension. German Chancellor Olaf Scholz’s April 2024 visit underscores Germany’s commitment to fostering this partnership, reflecting a mutual interest in maintaining economic ties despite ideological differences.
Economic Pragmatism
As the second and third largest global economies, China and Germany’s economic interdependence is crucial. Germany emerged as China’s primary trading partner in 2023, with trade values reaching €254.4 billion (US$280 billion). In response to global scrutiny, Germany has taken a balanced approach, emphasizing economic stability over political discord. This was evident during Scholz’s prior visit in November 2022, where his diplomatic tone contrasted with broader EU sentiments.
Facing Challenges Together
Despite increasing public skepticism in Germany regarding China’s global influence and human rights issues, both nations continue to seek common ground. Their October 2023 Joint Statement highlights intentions to pursue cooperation in areas like carbon neutrality and open markets. To navigate these complex terrains, Germany can utilize its institutional frameworks to enhance dialogue, while also considering supply chain diversification to reduce dependency on China. The intertwining nature of their economies suggests that, despite challenges, both countries will continue to prioritize their substantial trade relations.
Source : Trade trumps political persuasions in China–Germany relations
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
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