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  1. Doklam standoff: India, China trade ties to be hit; in crisis, what can really happen

Doklam standoff: India, China trade ties to be hit; in crisis, what can really happen

The bilateral trade stands at around $70 billion and the trade balance is heavily skewed in favour of China

By: | New Delhi | Published: August 24, 2017 6:15 AM
The standoff between India and China at Doklam hasn’t yet affected bilateral trade but the crisis is likely to have broader policy implications, including in trade, in the longer term. (Reuters)

The standoff between India and China at Doklam hasn’t yet affected bilateral trade but the crisis is likely to have broader policy implications, including in trade, in the longer term. Analysts say ever since the 2014 border stand-off (during Chinese President Xi Jinping’s visit to India), India has been cautious. However, this time around, the high-pitched anti-India rhetoric by China has damaged the prospects for cooperation. India does not have too many levers to pull vis-a-vis China although trade might be an area that India might be able to use in order to inflict pain on China. The bilateral trade stands at around $70 billion and the trade balance is heavily skewed in favour of China. Access to China in the areas of infrastructure, power and telecom must be cut off as well, says Rajeswari Pillai Rajagopalan, senior fellow at Observer Research Foundation.

Since bilateral trade is hugely tilted in favour of China, any prolonged stand-off will likely hit China more than India, said analysts. While total trade between the two nations stood at $71 billion in 2016, India witnessed a massive trade deficit of $46 billion with China, partly due to non-tariff barriers imposed by the giant neighbour on India. Although Doklam crisis has hit trade through Nathu La Pass, trade through this route accounts for not even 1% of the total bilateral trade. India exported goods worth only `63.38 crore in 2016 and imported items of `19.30 crore through Nathu La. The Chinese President, during his visit to India in 2104, had announced $20-billion investments in India (over a five-year period). Analysts had earlier predicted that the investments from China would offset the damaging impact of the massive trade deficit to some extent. However, only around $1 billion investments are learnt to have flowed in by September 2016.

Analysts said while trade between the two countries hasn’t been dampened so far, continued belligerent rhetoric from China may prompt private people to vent their anger against Chinese goods, as was noticed earlier when some people called for a boycott of Chinese toys and even crackers, even though the Indian government hasn’t put any curbs on Chinese products. In an interaction with members of the Indian Association of Foreign Affairs Correspondents, former national security adviser Shiv Shankar Menon said all the technical work on settling the boundary issue between India and China was complete, and now a political decision has to be taken for final resolution.

However, Menon pointed out that it was a complex relationship and the ties between the two Asian powers were under stress at present, with the situation being exacerbated by the rise of ultra nationalism which always reduces the space for any government to make concessions in larger interest of peace and stability. Menon was of the view that the present stand-off with China might not be defused till November after the annual Congress of the Communist Party of China was over, underlining that no leader in China would like to come across as weak to their party; so until November no sign of thaw could be expected. The former National Security Adviser also called for India changing the way it was dealing with the neighbours and the world as a whole. He was of the view that India made a mistake by not responding to Sri Lanka’s request for development of Colombo Port, and the result was that the Chinese came over and did it. India’s failure to respond to Sri Lanka became all the more surprising as 83% of its trade was handled by the Colombo port.

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