India: Chinese Led Anti-U.S. Trade Bloc Threatens to ‘De-Industrialize’ Countries

India's Foreign Minister Subrahmanyam Jaishankar (R) attends the four Indo-Pacific nations' foreign ministers meeting in Tokyo on October 6, 2020. (Photo by Kiyoshi Ota / POOL / AFP) (Photo by KIYOSHI OTA/POOL/AFP via Getty Images)
KIYOSHI OTA/POOL/AFP via Getty Images

India’s Foreign Minister Subrahmanyam Jaishankar reaffirmed his country’s confidence in not participating in the world’s largest trade pact, the China-led Regional Comprehensive Economic Partnership (RCEP), in remarks on Tuesday, suggesting that China had not presented “the full picture” of what the pact entails in an honest way.

The RCEP binds 15 nations — including key American allies like Australia, South Korea, and Japan — and a third of the world’s GDP in a trade agreement that expands China’s ability to do business in those countries. The deal allows for shipping products manufactured in participating countries much more easily, limiting requirements for certifying the origin of products. This benefits China greatly given the large percentage of the world’s manufacturing capacity that it controls.

The deal also notably does not impose any human rights, labor rights, or environmental requirements on the participating countries, key for China as the world’s leading concentration camp administrator and carbon emitter. Under the Paris Agreement, an environmental pact from which President Donald Trump withdrew, citing its unfairness to Washington, China has promised to increase carbon emissions for at least the next decade.

China’s state media outlets have celebrated the RCEP as a way to “end U.S. hegemony.”

The Indian government, the largest democracy in the world and a core economic powerhouse in Asia, did not join RCEP. Under Prime Minister Narendra Modi, India has launched incentives to entice manufacturers out of China and into India under its “Make in India” campaign. Modi has encouraged local companies not to manufacture outside the country and to limit imports. A grassroots campaign also surfaced this summer to boycott Chinese products in response to China’s incursions into Indian sovereign territory in the Himalayas.

Jaishankar expressed concern on Tuesday that signatories to the deal will be subject to “state capitalism” and may fall prey to de-industrialization.

“The effect of past trade agreements has been to de-industrialize some sectors. The consequences of future ones would lock us into global commitments, many of them not to our advantage,” Jaishankar said in remarks to the Indian School of Business, according to the Times of India. “Those who argue stressing openness and efficiency do not present the full picture.”

Globalized economics, he added, presented the dangers of “non-tariff barriers and state capitalism” sometimes under the guise of free trade. “In the name of openness, we have allowed subsidized products and unfair production advantages from abroad to prevail. And all the while, this was justified by the mantra of an open and globalized economy.”

With prior governments, the foreign ministry said, India “allowed the framework to be set by others,” which he called “quite extraordinary” given how “attractive” India’s economy is.

“With the passage of time, our predicament became increasingly serious. The choice was to double down on an approach whose damaging consequences were already apparent or to have the courage to think through the problem for ourselves. We chose the latter,” Jaishankar said. “As the world of technology applications and global production becomes more integrated, choices today have a much deeper strategic implication. The limited progress we have made and the gap with our real potential puts us in an especially difficult position.”

Jaishankar said India would strive to “to enter the global arena with cards to play, not just to provide a market for others. This is really about seriously building comprehensive national power.”

The Times of India called the warnings against nominally “free” trade in Jaishankar’s speech a “direct hit at China, whose policies of subsidies to their state-owned enterprises ends up with Chinese products deeply undercutting those from other countries, and hitting at their own manufacturing capabilities.”

China came in for additional indirect criticism as well. Jaishankar reminded his audience that it was India that had called out China’s BRI and shaped the international discourse on connectivity projects, that they should be transparent, environment friendly and respectful of sovereignty,” the newspaper added.

RCEP members have not given up on enticing India to join the trade agreement, which would strengthen its ability to damage the American economy. The countries issued a joint statement on Tuesday offering India a chance to participate as an “observer” state and as a partner in cooperative deals between India and the states collectively.

“Acknowledging the strategic importance of India eventually becoming a party of to RCEP,” the statement reportedly read,” RCEP Signatory States will commence negotiations with India at any time after the signing of the RCEP Agreement once India submits a request in writing of its intention to accede to.”

“This Agreement is open for accession by India, as an original negotiating State, from the date of its entry into force,” the member parties insisted.

The Chinese Foreign Ministry celebrated the RCEP as an “important milestone of regional economic integration” on Monday.

“The signing of the RCEP against the backdrop of the COVID-19 [Chinese coronavirus] pandemic, the severe global economic recession and rising unilateralism and protectionism is a strong boost to regional economic recovery and global economic growth,” spokesman Zhao Lijian, who has previously accused the U.S. Army of causing the Chinese coronavirus pandemic, told reporters. “This shows that all parties are committed to multilateralism and free trade, firmly support an open, fair and win-win multilateral trading system, and stick to solidarity and cooperation in meeting challenges.”

The Global Times, a state-run propaganda newspaper, framed RCEP as a threat to America, rather than simply a global economic achievement. Prior to its official signing, the newspaper published a column this weekend arguing that the deal “will end U.S. hegemony in the west Pacific.” The Global Times also framed RCEP as an extension of the Belt and Road Initiative (BRI), dictator Xi Jinping’s global infrastructure plan that sells construction contracts to developing nations at prohibitive prices, then saddles them with debts payable to China.

“The signing of RCEP also echoes well with China-proposed Belt and Road Initiative (BRI) to promote regional integration and further strengthen policy communication with countries along the BRI,” the newspaper explained. “Based on the Joint Leaders’ Statement on the RCEP issued in November 2019, they agreed to directly promote the connection of facilities with BRI construction.”

“Faced with RCEP’s signing, Washington has very few options left,” the column concluded.

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