Indian Ambassador points to deficit with China as trade negotiations loom

Another thorn in China’s side . . .

India’s ambassador to China, Vikram Misra, called for “very intense dialogue” with China to address India’s trade deficit with China and market access for Indian goods. The trade deficit actually decreased by US$10B in 2018 and now stands at US$53.6B; however, Misra believes that it could, if unchecked, become “politically sensitive” in India.

An elephant in the (trade negotiations) room . . .

Trade is major part of China-India relations: bilateral trade is expected to exceed US$100B in 2019. India’s call to address the trade deficit comes as negotiations for the Regional Comprehensive Economic Partnership agreement (RCEP) loom just over the horizon. India is taking part in negotiations to join RCEP, which includes China and other Asia Pacific nations, but is wary about opening up its economy. Negotiators have called on India to open 90 per cent of its market, though Indian industry experts say the country can open no more than 42 per cent if it wants to protect its most vulnerable industries.

To trade or not to trade?

India finds itself in a tricky situation. If it chooses to pursue RCEP and accept a compromise on opening its market, it risks widening its trade deficit with China even further. But should India decide to prioritize lowering the trade deficit with China over joining RCEP, it risks losing out on joining the world’s largest free trading bloc, with 25 per cent of the world’s GDP and 30 percent of world trade. RCEP negotiators hoping to wrap up discussions this year, leaving India little time to decide.