By Safiye Ergun
On 9th of August, 2021, Australian special envoy and former Prime Minister Tony Abbott wrote in an opinion essay that a free trade agreement between his nation and India would signal the “democratic world’s tilt away from China.”
“With the world’s other emerging superpower becoming more belligerent almost by the day, it’s in everyone’s interests that India take its rightful place among the nations as quickly as possible,” he added. The Chinese side countered Abbott with the statement “India [has] no cure for Australia’s trade woes.”
Such an official discourse from Australia once again brought the Indian-Chinese competition to the fore. In this regard, as The Asia Today Editorial Board, we reached out to Mr. Don McLain Gill and kindly asked his comments about the issue.
Don McLain Gill is a resident fellow at the Manila-based International Development and Security Cooperation (IDSC) and director of South and Southeast Asia at the Philippine-Middle East Studies Association (PMESA). He is also a geopolitical analyst and an author who has written extensively on South Asian geopolitics and Indian foreign policy.
In the aspect of economy, would you make a general evaluation between China and India, especially for their trade relations with Australia? Do you agree that India cannot meet the economic expectations of Australia?
It is a reality that China and India are two major powers in the continent. Both countries have robust militaries with large economies and a high population rate. However, if we look into the economic capacity of both powers, there is an inevitable asymmetry. China continues to hold on its place as the second largest economy in terms of GDP size, while India was able to climb to fifth place in 2019. However, due to the crippling effects of the COVID-19 pandemic, India slipped into sixth place in 2020.
While the pandemic has devastated nearly all countries around the globe, India was the most affected major economy. On the other hand, China was able to significantly bounce back. There will be a lot of work that needs to be done to create the right atmosphere for growth in India amid the turbulence caused by the pandemic. However, as the COVID-19 crisis is beginning to ease, India will surely have the opportunity to bounce back.
Looking into the recent statements from Australia and China, it is important to look at not only economic factors but also geopolitical once too. While India’s trade with Australia is dwarfed by China’s trade, the increasing friction points between Canberra and Beijing cannot be simply disregarded. Australia has been at the receiving end of China’s coercive and assertive actions.
Moreover, China has been using its highly interdependent trade with Australia as leverage for its strategic interests. China is Australia’s largest trading partner. Moreover, it is important to also note that large imports of iron ore and coal into China helped Australia avoid a recession during the global financial crisis and allowed it enough buffers to lighten the economic burden caused by the pandemic. It is a reality that China has solidified its position as a pivotal factor in Australia’s economy, and despite the latter’s desire to decouple from the former, it will be an arduous and long-term process.
Positive trends have been occurring between India and Australia. The Comprehensive Economic Cooperation Agreement (CECA) negotiations, which was stalled since 2015, are seen to be back on track. However, due to the pandemic, bilateral trade fell. With this in mind, experts have suggested that India-Australia economic relations may have to rely on an investment led growth.
As China continues to rise and as it becomes more economically powerful, countries that are dependent on it for trade will inevitably face a series of constraints if they do not abide by its dictates and interests. Since the spread of the COVID-19 pandemic was linked to China’s lack of transparency, a number of key powers such as Australia have demanded accountability. This was enough to earn the ire of China.
With these events taking place, countries have considered to redirect their businesses away from China. India has been considered as a potential candidate for this endeavor. The South Asian power has taken the initiative to showcase its willingness to fill in the gap. The Indian state of Uttar Pradesh has been forming an economic task force to attract firms that are interested on moving out of China. Moreover, India is also preparing a pool of land, approximately twice the size of Luxembourg to offer companies that would want to move manufacturing out of China.
Though these initiatives are steps in the direction, the process is much more complicated than that. The pandemic has financially crippled these companies. Despite their interest to move out, the costs that they will have to shoulder for the process will be large. This is one factor that may delay such an undertaking. Second, due to the “stickiness” of production lines and supply chains, it will be significantly arduous to yank them apart in just a few months or years.
Third, despite India’s great potential to accommodate multinational businesses, its lack of integration with major global and regional supply chains serves as a major obstacle. The decision of India to not push through with the RCEP may be seen in this light. Fourth, India will need to create better conditions for multinational companies to supply the local market and utilize the country as a production hub for global exports.
This does not mean that India will not be able to reach that level in the future. The noteworthy size of its market presents an irrefutable long-term opportunity for investments particularly in the manufacturing, services, and infrastructure sectors. However, India will have to expedite major structural reforms to maximize its potential. In line with this, countries like Australia may not be able to decouple from China effectively in the short-term because of the risks involved; however, if India plays its cards right, it may be able to position itself as a formidable alternative in the long-term.
China and India are important actors for the rise of Asia. For now, China-India is in cooperation, similar to China-Russia. In the long run, do you foresee any possibility of critical conflicts between the two?
India has always maintained its desire to forge cordial and fruitful relations with China since 1947. In fact, India was one of the first non-communist countries to recognize China. Moreover, India openly supported China to be a permanent member of the United Nations Security Council. However, China’s interest to expand comes at India’s expense. Until this day, China continues to claim Indian territory and has collaborated with Pakistan to constrain India’s regional interests in the Indian Ocean Region. More recently, China’s incursions in Eastern Ladakh represent a dissatisfied revisionist power steadfast in altering the geopolitical landscape of the IOR in line with its narrowly defined interests. China’s provocative actions show its blatant disregard for international law and cooperative agreements such as those in 1993 and 1996.
Until peace and respect on both sides are achieved, China-India bilateral relations will not be able to be restored back to normalcy. India has consistently emphasized that it is always willing to openly discuss security issues with China based on principles of democratic and transparent engagement, and respect towards internationally agreed upon norms. The question from India’s point of view is whether China will tone down its assertive and unilateral actions and invest in continuous open discussions to secure the future of the continent.
India is the biggest borrower of the AIIB – Chinese led multilateral bank. This is an obvious advantage for China in the struggle to become a superpower. Do you think that this brings a dependency of India to China?
While it is true that India remains as the largest recipient of the total value of loans from the AIIB, it must be understood that the AIIB is not a Chinese bank. Rather, it is a multilateral institution. Though China plays the biggest role in the institution, its multilateral nature should not be overlooked. As a result, despite the tensions surrounding India-China bilateral relations, India’s activity and involvement in the multilateral institution will not see any significant changes.
However, in the aspect of bilateral trade, it is worth noting that despite the tumultuous security challenges facing both Asian giants, the figures continue to rise.
In fact, in 2020, China displaced the US as India’s top trading partner. In fact, India runs a trade deficit of around USD 46 billion with China. Despite the desire to decouple from China, India’s efforts have not been so effective.
However, any rash move from India without properly scrutinizing the implications may result in higher costs. India must carefully navigate and weigh the costs and benefits in taking economic decisions given the already catastrophic effects of the pandemic.
According to the neo-Gramscian school of thought, a hegemony project of the world order succeeds only with the tacit consent of the governed. In this context, do you find India or China successful in building a new historical bloc against the US hegemony when their image in public opinion is taken into consideration?
The reality of the international system is that it is entering deeper into a multi-polar world order. This means that having multiple poles throughout the system is inevitable. We are well beyond the unilateral moment and rising great powers are an inevitable reality. However, what is interesting to look into is whether an established great power will be threatened by all rising great powers (in accordance to mainstream IR theory). China and India are two potential great power candidates in the system due to their robust military strength, large economies, and their huge population size.
As I have argued in my journal article, “Beyond Offensive Realism: India’s Rise, U.S. Accommodation”, power and perception are two important factors to determine whether states cooperate or compete.
China’s rise has been greatly perceived as a negative phenomenon by the US because of its interests to revise the dynamics of the established global rules-based order. China has been often labelled as a revisionist great power in this sense. However, India has been projecting itself as a benign, responsible, and status-quo great power. It also seeks to apply the current rules-based order in its great power designs. Due to this, the US has been significantly accommodating India’s great power ambitions. This is greatly in contrast with its attitude towards China.
In terms of public opinion, India has been seen in a more favorable and positive light for its role as a security provider and responsible stakeholder in the system compared to China, considering that the latter is embroiled in a series of territorial disputes and is known for its lack of transparency and assertive actions towards other countries.
In summary, it will be expected that India’s rise to take its spot as a potential pole in the system will be relatively more peaceful than China’s.