Trade agreements with India to the rescue of political careers
In many capitals around the world, leaders are adopting a new formula for re-election: phoning Indian Prime Minister Narendra Modi (or, better yet, flying to India), bashing Ukraine, signing a trade deal (even a interim will do). Three examples of this pattern stand out: the leaders of Australia, the UK and the EU (European Commission President Ursula von der Leyen is in India from April 24) are all looking to stays in India to bring partial solutions to their national problems. Even Mauritian President Pravind Jugnauth, currently visiting India, seems hopeful his tour will help silence rising opposition in his country.
India’s non-committal stance in the Russian-Ukrainian conflict has upset a working geopolitical balance, sparking apprehensions in the global community that India is getting closer to China, through the Sino-Russian partnership, despite past concerns. Since there are no permanent friends or enemies, the greatest geopolitical risk may not be that India falls back into the arms of Russia, but reenters the sphere of influence of the China. This likely explains why world leaders are rushing to sign quick trade or trade deals, even if they are incomplete or ad hoc; this is apparently an attempt to engage India in a closer trade relationship with Western economies and perhaps anticipate the strengthening of a Sino-Russian axis. There are two other side benefits: it not only helps cover up the Western economic bloc’s presence in China (China-Plus-One strategy in silly parlance), but also gives their leaders bragging rights at home.
This flow in the calculus of global power undoubtedly places India in a unique bargaining position. However, much will depend on what India gets out of this global rush to sign trade deals: only noise and photo ops or hard-line deals that actually drive India’s economic growth.
A starting point could be the India-Australia Economic and Trade Cooperation Agreement (ECTA). The trade pact is a promising development for India-Australia relations and was struck at an accelerated pace after the intervention of the leaders of the two nations. It is ambitious and has the potential to increase trade between the two nations by 25% immediately. Amitabh Mattoo, a professor at Jawaharlal Nehru University, commented in an op-ed: “ECTA represents…an important turning point in India’s foreign policy – both in terms of geostrategy and geoeconomics.” Indian Trade Minister Piyush Goyal and Australian Trade Minister Dan Tehan commented in another co-signed editorial: “This landmark agreement will eliminate tariffs on over 85% of Australian goods entering India and almost all Indian goods entering Australia upon its entry into force”.
The “entry into force” device is where commerce meets politics. Australia will need the assent of its parliament before the deal becomes a reality. But Prime Minister Scott Morrison, whose personal intervention and coordination with Modi made the deal possible, has called for a new general election now due to be held on May 21. The Australian parliament was officially dissolved on April 11, thus relegating ECTA to something of a gray area. Two paths diverge here: if Morrison is re-elected, there will be no problem. But if Morrison is not re-elected – early polls gave his Labor challenger a slight lead over him – Australia’s parliament may choose to renegotiate the interim deal. Even assuming Australia’s new PM sticks to the deals of its predecessor, it is highly likely that there will be national pressure to bring ECTA to its logical conclusion.
The initial ambition was for the two nations to enter into a comprehensive economic cooperation agreement, which is much broader in scope, hugely ambitious and would include, among other things, digital trade, agriculture and government procurement.
Interestingly, the two governments decided to set up a negotiating team to resume CECA negotiations, 75 days after the signing of ECTA. It is however unclear whether these talks would be subject to ECTA ratification.
British Prime Minister Boris Johnson has also rushed to India amid growing clamor in Westminster for his resignation and speculation he may be forced to call a snap election. Compared to the bold ECTA, or even a recently signed Comprehensive Economic Partnership Agreement with the United Arab Emirates, Boris Johnson’s visit was mostly rich in rhetoric and promise. Johnson and Modi have both agreed to speed up talks to strike a free trade deal by the end of the year, kicking the proverbial box down the road. So it’s debatable whether Johnson will have anything tangible to show upon his return that could help him save his premiership.
Bernd Lange, chairman of the European Parliament’s Committee on International Trade, visited India recently to discuss how the pending trade deal with India could be signed ahead of the round of the 2024 European Parliament elections. . Lange’s trip is supported by a visit from Ursula von der Leyen who, among other things, is also expected to discuss the long-awaited trade deal. The EU’s participation in India is essential: it is among India’s largest investors, with more than 4,500 European companies operating in the country.
At a time when geopolitical cards are being reshuffled, a trade pact with India seems to have become an asset.
Rajrishi Singhal is a political consultant, journalist and author. His Twitter handle is @rajrisishinghal.