In my last column I took the communists’ critique of the prime minister’s foreign policy tilt seriously, and discussed how it could be made to make sense. The tilt towards America is the result of Manmohan Singh’s perception that China’s intentions towards India are not friendly. If they are to disagree with his policy inclinations, the communists must argue for the possibility of that Hindi-Chini bhai-bhai business. They must prove its feasibility, and visit China to prove it if necessary.
But even if the communists are mistaken, it is possible to fault the government’s foreign policy on another count: it is still stuck in 19th-century gunboat diplomacy. Foreign policy does involve maintaining an armed force, threatening other countries and doing violence to them once in a while. But means of violence have lost quite a bit of their effectiveness. They were very effective when the Industrial Revolution gave Europe a head-start in military technology. In the 18th and 19th centuries the new arms, engines and vehicles overturned the balance of power in the Mediterranean, and destroyed the Turkish empire, the greatest the world had seen till then. They led to the creation of its successor, the British empire, as well as the less extensive French and Portuguese empires.
Then, as the new technologies spread and the new arms and equipment became more widely available, imperialists found it difficult to control their colonies; after World War II they retreated into their European fortress. Their successors were richer and better armed, but they could not reproduce the colonial model. Little Afghanistan and lesser Chechnya gave Russia a bloody nose; the little Liberation Tigers of Tamil Eelam forced the Indian army to retrace its steps across the Palk Strait; little Iraqis are giving the mighty Americans a bloody nose.
Thus, the returns of state violence have dwindled. As they have gone down, governments have looked for other ways of influencing other states. Of them, aid is over half-a-century old now. It was discovered accidentally after World War II. The United States of America had a big payments surplus as well as a grain surplus, and the Europeans had been prostrated by the war. So the US tried out the Marshall Plan, a massive aid project. It worked beautifully; by the mid-Fifties Western Europe was back on its feet and no longer in need of aid.
Then the US, in league with the World Bank and European countries, tried out the same thing in developing countries, including India. The results were very disappointing. The aid was captured by those who controlled the governments; little difference was made to the people for whom it was meant. After the oil crisis in the Seventies, the Western governments themselves started feeling poor. Then the Soviet Union began to decline, and with it, competition between it and the US also lost its intensity. So both cut down aid.
China, the newest superpower, has brought in an entirely new technique of influencing countries: it imports goods from them. Its share in their exports has been rising dramatically. China is also our second largest customer, next only to the US. The US took 17 per cent of India’s exports in 2005-06, while China took 11 per cent. And it is a far more important customer for most other countries than for us. Everyone is aware of the avalanche of industrial goods that is tumbling out of China; few are aware that China is the largest market for a growing set of countries. China is also our largest supplier. Of our imports of $142 billion in 2005-06, $13 billion came from China. Trade dependence makes them friendly to China. And it generates none of the awkwardness, embarrassment and insecurity that aid does.
China does not simply trade; it combines trade with aid and investment. For instance, it takes a quarter of Angola’s oil exports. But it has also given Angola $2 billion in aid; it is building roads, railways, hospitals, schools and bridges, laying a fibre optic network, and training telecommunications workers. Its strategy towards every country is to develop a relationship which is highly flexible and customer-oriented.
This strategy of increasing interdependence, building relationships and financing infrastructure that growing interdependence would require — this is what is utterly lacking in India’s foreign policy. India sits in the middle of the Indian Ocean. This is its pond; what happens in and around this ocean closely affects our interests. Yet China has come up from behind and stolen a march over us in Africa.
What could we do' It is no use imitating the Chinese blindly; they will be better at what they invented, however much we chase them. But trade dependence is a weapon that we could use as well, if we opened our market to countries around the Indian Ocean.
We delude ourselves that we are doing this through the free trade agreements Kamal Nath is negotiating with a large number of countries. But those agreements are actually instruments for restricting trade with those countries. For one thing, we agree to very limited tariff concessions. For another, we keep a large number of commodities out of the agreements. And all the agreements have enormous delays built into them; they require that little should happen for years.
If we took the situation seriously, if we became aware of the competition we are facing, we would forget all about reciprocity; the Chinese never think of it. We would offer all the countries around the Indian Ocean unilateral free trade — duty-free access to the Indian market for all the goods they produce, with nothing required in return. The more they export to India, the more dependent they will be on us, and the more friendly they will feel towards us. We are extremely short of lentils. We would give east African countries a guarantee that if they grew dals for us, we would let them in duty-free for all foreseeable time. Dals will never constitute a significant proportion of our imports, but could become a significant export for small countries. The same goes for vegetable oils, cotton, tea, minerals, metals and hundreds of other goods. We should put no commodity-wise restrictions on imports from neighbouring countries; we should only ensure that the value added is sufficiently high, so that trade concessions to those countries are not used for tariff jumping. And we should reduce tariffs to a level that would make tariff jumping unprofitable.
Similarly, we should open our educational institutions to students from Indian Ocean countries, and open our job market to trained workers from those countries. We should let them work in our BPO firms which are facing a severe labour shortage. We should make use of the fact that we have an open, capitalist economy, and integrate people from neighbouring countries into it. Those who have studied and worked in India are far more likely to be India’s friends when they go back to their countries; they are more likely to seek joint ventures with Indian firms, buy Indian machinery, and look for executives from India. They will create the close ties with us that we want in our interest. China gives scholarships to thousands of foreign students. But they would prefer an Indian education in English.