Sino-Indian strategic ties to be determined by future ‘bilateral trade’

By Sreeram Chaulia

The beneficial impact of international trade on economic growth is widely accepted. But whether trade can improve political relations among nations is debatable. A new book by Pakistani writer Ahmed Rashid, Pakistan on the Brink: The Future of America, Pakistan and Afghanistan, has reopened this debate by positing that China no longer treats India as its enemy owing to the $74 billion worth of bilateral trade between the two.

Rashid ridicules delusions in Pakistan that China will continue to offer unconditional support to it against India. Beijing was an ‘all-weather ally’ of Islamabad in the past owing to geopolitical compulsions of checking New Delhi in south Asia, but Rashid’s argument is that this calculus has been irreversibly altered by freer trade between China and India in the last decade. Contrast this with the $9-billion Sino-Pakistani trade, which has not transcended the defence sector.

Sino-Pakistani trade’s lack of a private sector dimension means there are no strong constituencies in either country that root for closer integration and foreign policy consonance. Outside state elite circles, reminds Rashid, China is an unfamiliar abstraction for Pakistanis, who have little contact with Chinese counterparts. Burgeoning Sino-Indian trade with private sector involvement, on the other hand, leads to frequent travel, collegiality and even commonality of interests between exporting and importing firms on both sides.

That trade generates interdependence and peace between states is axiomatic. Cordell Hull, the US Secretary of State during World War-II and a champion of commercial liberalism, said famously that “if goods do not cross borders, then armies will”. His intellectual inspiration, the 19th-century British free trade campaigner Richard Cobden, also believed that peace and mitigation of arms races between great powers could be achieved through reduction of tariff barriers.

One of the big puzzles of our times is how China and India are simultaneously growing at a fast clip, competing for global influence and power, and yet avoiding the prophesied wars that have recurred throughout European history among rising rival contenders. Is it trade, however lopsided in China’s favour, which is keeping Beijing and New Delhi on a non-confrontational track? Are business interests trumping military and strategic unease?

Critics point out, however, that trade flourished pre-World War-I among Europeanpowers. The fact that tariffshad been dramatically reduced across Europe since the 1860s through a series of bilateral free trade treaties did not save the continent from a destructive naval counterbalancing race, culminating in a terrible world war.

How did liberal interdependence fail to produce the positive externalities of security and peace in this case? Citing this instance, anti-liberal writers warn against blind faith in the political miracles that trade allegedly delivers.

However, Dale Copeland, a professor at the University of Virginia, has explained the pre-World War-I breakdown of cooperation and understanding among European powers as actually a vindication of liberal interdependence. The key for animus-free foreign relations, according to him, is not the past or present value of bilateral trade but the ‘expectations for future trade’. Germany did have thick past and present trade relations with its European neighbours, but by the mid-1890s, it had become wary about trade protectionism from Britain, France and Russia. The idea of a ‘central European economic area’ seemed doomed by the early 1900s, as other European powers began to work in tandem to check the German industrial and exporting colossus.

If Copeland got it right, the direction of Sino-Indian strategic ties will be determined by whether or not both parties believe that future bilateral trade is on a rosy path. Foreign minister S M Krishna recently exuded confidence that the two countries were on course to achieve a trade volume of $100 billion by 2015. Chinese diplomats project this figure to cross $120 billion even earlier. The ‘future expectations’ of trade are, hence, quite optimistic, even though New Delhi is dissatisfied with the massive trade deficit it is running with Beijing at the moment.

So, has Pakistan’s legendary ‘special relationship’ with China aimed at weakening India been buried by the avalanche of Sino-Indian trade and does this mean perpetual peace across the McMahon line? Such a conclusion is premature due to the pitfalls of economic determinism and reductionism. Insecurities and balance-of-power manoeuvres persist among major trading partners and they may even be necessary to prevent a slide into armed conflicts. But contrary to doomsday predictions that a second war between China and India is imminent any day, the expectation of deeper bilateral trade is helping to banish that prospect.

(The author is vice-dean at Jindal School of International Affairs)



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