Catching up: looming trade issues for India and South Asia


Historically, South Asian countries, including India, have been rather timid in their comprehensive approach to international trade. The latest example is India’s decision to withdraw from the Regional Comprehensive Economic Partnership (RCEP), with concerns expressed including a possible increase in imports of manufactured goods from China and imports of dairy products from China. New Zealand. India’s neighbors have been even more reluctant to view trade as a critical cog in development, erecting barriers to regional and global trade, resulting from fears over Chinese and Indian imports. All of this has made South Asia the most protected and least integrated region in the world.

Although South Asia is hesitant, its highly competitive East Asian neighbors are making great strides, raising the bar for South Asia to attract foreign direct investment (FDI) and access global markets. Vietnam, in particular, shows strong recent evidence of deepening its already strong engagement in international trade, entering into free trade agreements with the European Union (EVFTA), the United Kingdom and with the United Kingdom. ASEAN plus five countries (RCEP). Earlier, Vietnam signed the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP), which entered into force for Vietnam in 2019. Further from home, the renegotiated trade agreement between the United States and Mexico (USMCA) rewrote some trade rules between the three countries, potentially affecting countries in Southeast Asia. In addition, the trade war between the United States and China, as well as President Joe Biden’s recent presidential decree aimed at maximizing public procurement of “Made in America” goods and services, offers a mix of new opportunities and opportunities. new potential obstacles for South Asian countries.

In addition to preference erosion, the next decade is likely to see major shifts in global trade flows resulting from efforts to secure strong supply chains for essential products such as semiconductors and commodities. pharmaceuticals for Western countries, commitments to net zero carbon emissions by 2030, and developments in areas such as artificial intelligence, 5G telecommunications, biotechnology and renewable energy.

The question now is how can India cope with the likely significant erosion of market access and shifting investment incentives? In addition, instead of being reactive to the changing environment, could India take a more proactive approach to forging economic alliances – covering both market access and access to markets? technology – which take into account rapid developments in advanced technologies? This note poses a number of questions and initial assumptions in this regard, based on preliminary data analysis, setting the agenda for future exploration. It will be followed by a series of policy papers which will analyze many of the questions it poses. The note will also attempt to identify implications for some other South Asian countries, as they are affected by the evolution of global alliances as well as India’s approach to these alliances.

The study is available here

(The study was written by Sanjay Kathuria, TG Srinivasan and Prachi Agarwal)


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