The Telegraph
Wednesday , November 14 , 2012
Since 1st March, 1999
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Singh trade headache

New Delhi, Nov. 13: The lights on Delhi’s streets this Diwali were mostly shipped out of China’s Shanghai and many of the plastic images of goddess Lakshmi, the Hindu deity of wealth, being sold in its bazaars have come from dingy factories in Guangde in South China.

The cheap lights and shiny images may bring cheer to many Indian homes but for the country’s policy makers, led by Prime Minister Manmohan Singh, they are a pointer to the dilemma Singh will face in Phnom Phnem this Sunday when he meets Chinese, Japanese, Korean and Asean leaders to discuss a proposed pan-Asian trading bloc.

The twinkling lights and images imported from India’s largest trading partner have already made thousands of Indians working in small scale lighting and decorations factories in western Uttar Pradesh jobless.

In the first 10 months of this calendar year, India has run up a trade deficit of $23 billion because of rising Chinese imports and falling exports. India imports finished goods ranging from cheap lights, mobile phones and consumer durables to stainless steel and electric gear from China and mostly sells raw materials such as iron ore, chrome, lead, copper and cotton to its northern neighbour.

At the Cambodian capital, Singh will join leaders from China, Asean and East Asian countries for talks to create the RCEP — or Regional Comprehensive Economic Partnership — an Asia-wide trading bloc which Beijing wants to forge as a counter to US President Barack Obama’s Trans-pacific trade bloc, which shuts out China and draws Asia closer to the Americas in a trade partnership.

Till now, for nearly a decade, China has sought to keep its trading bloc restricted to East and South East Asia, by involving Asean, Japan and Korea, while shutting out India, Australia and New Zealand. India and Japan have long been resisting China’s attempt to forge a trade pact, which Beijing would dominate by demanding a pan-Asian trading block of Asean+6 (Asean, China, Japan, Korea, India, Australia and New Zealand).

Possibly to trump Obama’s proposed trade bloc, China has suddenly changed tack and adopted the Indo-Japanese proposal as its own. With this comes India’s and many other potential RCEP members’ dilemma. If they do not join, they can lose a first-mover advantage to be part of the world’s most powerful trading bloc, which would control nearly 30 per cent of global GDP. However, joining it could mean reducing tariff walls and letting cheap Chinese imports flood local markets.

Analysts say Chinese industry benefits from cheap finance, almost no labour laws, hidden subsidies by way of capital costs often underwritten by provincial or central government and sometimes unfair price cutting.

The Indian government’s Standard Board of Safeguards, under the commerce ministry, will hold a meeting on November 15 to decide whether China is dumping stainless steel products in India, acting on a complaint by Jindal Stainless Steel. The Directorate General of Safeguards, under the finance ministry, has already supported Jindal’s case. India has earlier, too, been forced to raise import duty on steel to protect domestic manufactures from dumping by Chinese steel firms.

Last year in a speech, US Eximbank president Fred Hochberg said, “In India, (Chinese telecom equipment maker) Huawei grew to $2.5 billion in sales from $50 million in one year. That kind of growth takes more than just good sales and marketing strategies.”