A Free Trade Agreement between Quad nations: Vision or reality?

August 26, 2020 5:24 PM

As the country with the most to gain from such a partnership, perhaps India will need to shed its hesitance and lead the alliance.

The outbreak of COVID-19 followed by China’s assertive global posture has resulted in a flurry of meetings and discussions particularly among the Quad countries.The outbreak of COVID-19 followed by China’s assertive global posture has resulted in a flurry of meetings and discussions particularly among the Quad countries.

By Dr Mukesh Aghi

A rising and aggressive China, necessitates a stronger and more robust US-India bilateral relationship. Notwithstanding Secretary of State Mike Pompeo’s vocal support for India in the face of Chinese aggression on its northern borders, other confidence boosting measures between the two countries by way of closing a smaller bilateral trade deal that has long been in the works.However, to truly propel growth as nations recover from the after-effects of the pandemic, New Delhi will need to prioritize two correlated economic agendas. First, besides deepening security cooperation with the United States, India will needto explore economic partnerships with like-minded countries such as the “Quad nations” to counter Chinese influence more effectively. Strategic relations with the Quad, including a Free Trade Agreement, are in India’s best interest to counter Chinese assertiveness and secure its vision for the Indo-Pacific. Second and on a related note, the regional dynamic in the Indo-Pacific should be a wakeup call to Indian policy makers to make domestic reforms a corner stone to secure India’s economic growth.

There are plenty of reasons for elevating economic engagement with Quad nations— the four countries with over 1.8 billion peoplerepresent a quarter of the world’s population and over $30 trillion in combined GDP. Trade between the four countries exceeded $440 billion in 2018, with nearly $6 trillion in trade with the rest of the world. The Quadrilateral Security Dialogue was originally initiated in 2007 as a forum for dialogue, information exchanges, and military drills between involved nations. However, in the years since, the activity of the Quad has been inconsistent. India has been cautious to maintain status quo with China, particularly following the Wuhan Summit. However, increased Chinese assertions of power in the region have created a need to revive the Quad. For India, especially following the Indo-China border clashes in June, protecting its security concerns with an alliance of democratic nations in the region is now a necessity to maintain peace.

Moreover, the COVID19 pandemic has taken a toll on the global economy, including Quad nations in sectors ranging from employment to investments. Thus, deepening their economic relationships for increased freedom and cooperation will facilitate a swifter recovery from the pandemic’s impact.

But economic freedoms experienced by businesses in these countries are vastlyunequal. While Australia is considered the fourth freest world economy by the 2020 Index of Economic Freedom, Japan and the U.S. are ‘mostly free’ by the same metric and Indiais considered ‘mostly unfree’. Moreover, deepening stress between the United States and China has put pressure on American companies to diversify their supply chains that are currently heavily dependent on China. Although India is attractive as an alternative manufacturing hub, its relatively lower economic freedom and some restrictive policies are obstacles to this. Thus, from a regulation standpoint, India should focus on structural changes to prioritize domestic ease of doing business. Revisiting its tariffs and removing red tape would facilitate both the economic freedom required for a Quad trade deal, as well as make India a more attractive investment destination. With these domestic changes, India would be remiss not to capitalize on the opportunity to become a manufacturing hub and facilitate an FTA with the Quad.

There has been some skepticism to the idea of reviving the Quad, in spite of its alignment with the current needs of the region. As Quad countries value their diplomatic flexibility,they fear that a military agreement will hinder their ability to negotiate independently with China. However, the advantages of free trade between these nations go beyond strategic advantages. As the world reels from the impact of the pandemic and the global economy shifts towards greater protectionism, a Free Trade Agreement between Quad nations would also improve their place in the global value chain.

The outbreak of COVID-19 followed by China’s assertive global posture has resulted in a flurry of meetings and discussions particularly among the Quad countries. A recent teleconference with senior officials from the Quad countries on how to respond to the pandemic also included three additional Indo-Pacific powers, namely New Zealand, South Korea and Vietnam. New Zealand, despite being under the American security umbrella has traditionally shied away from taking an overt anti-China position. This only goes to show that the potential for a new security regime in the region already exists. As the country with the most to gain from such a partnership, perhaps India will need to shed its hesitance and lead the alliance.

(The author is the President and CEO of the US-India Strategic Partnership Forum. Views expressed are personal.)

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