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From De-coupling to De-risking

Context: The Trump-era policy which focused on  the U.S. to decouple from China is being phased out by a new concept. The U.S. has expressed that it is shifting its policy on China from decoupling to de-risking. The EU has already declared that its approach to China will be based on de-risking.

What is ‘de-risking’?

  • After the establishment of diplomatic ties between the U.S. and China in 1979, both the countries embarked on a path of increasing economic interdependence. China gained immensely from this relationship, as it helped the country drastically widen and deepen its diplomatic and economic engagement with the rest of the world.
  • As China’s economic and military power grew, its ambition to challenge the primacy of the U.S. in the international system became increasingly apparent. China’s rise not only came at the expense of America’s global clout, but also the latter’s domestic industry, which got “hollowed out” in its four-decade old economic embrace with China. ( This has been highlighted by United States as the weakness of the Washington Consensus, and for which it has floated the New Washington Consensus)
  • The Trump administration made it a point to attack the gargantuan bilateral trade imbalance in favour of China. It also wished to keep the U.S’s high technology sector out of China’s reach. The U.S.-China ‘trade war’ started, and bilateral relations were set on course for a “decoupling” from the American standpoint. 
  • The Biden administration added its own features into the China policy inherited from Trump. Most recently the label of “decoupling” has been changed to “de-risking”.
  • According to the U.S. “de-risking fundamentally means having resilient, effective supply chains and ensuring we cannot be subjected to the coercion of any other country”. For Example the U.S.’s geo-economic initiatives like the Partnership for Global Infrastructure and Investment as well as the Indo-Pacific Economic Framework for Prosperity are also supposed to reflect the spirit of de-risking.

Why the Change now?

The policy change has been announced in the wake of several events of high geopolitical significance. 

  • The world has just emerged out of the tentacles of the pandemic after three disruptive years and the global economy is hoping for a resulting rebound. 
  • The U.S.-China rivalry had peaked in the past few months from the ratcheting of tensions across the Taiwan Strait to the acrimonious spy balloon episode between the two countries.
  •  China also witnessed Xi Jinping beginning his second decade of rule over China
  • China Under XI and under his third leadership tenure, extended his “peace-making diplomacy” to West Asia, striking gold in normalising the frayed Saudi-Iran ties. 
  • Further the U.S.-China relations as a new Cold War and a zero-sum game appears to be risky for the U.S. Bringing more nuance into its earlier decoupling approach could bring down China’s guard and give the U.S. more room to re-consolidate its strength.
  • The Russia-Ukraine conflict could have played a pivotal role in enabling the U.S’s policy shift towards China. The Biden administration, unlike its predecessor, has made it a point to reassure its European allies. At a time when China has been backing Russia in its shadow battle in Ukraine against the West, the idea of decoupling hardly appeals to the European Union (EU). The EU has in fact been looking to woo China in order to convince it to stop supporting Russia from skirting Western sanctions.

All of these developments have necessitated the U.S. to recalibrate its posture towards China

What could be the geopolitical ramifications of de-risking?

  • The U.S. efforts to keep its allies closer in its geopolitical rivalry against China by adopting the path of de-risking has already won a significant victory in Japan at the G-7 summit.
  • The West’s moves to counter China’s rise much more sustainable by facilitating a united front among allies.
  • At the same time China has expressed its scepticism to the West’s de-risking approach, portraying it as a façade to the decoupling agenda. It has expressed its disapproval in painting China as the actor responsible for heightening geopolitical risks. According to China, the real source of risks is the U.S., which it alleges to have created instability across the world by pursuing political and military interventions and perpetuating a Cold War mindset.
  • For countries like India it will stand to benefit from de-risking by leveraging its benefits like attracting supply chains and confronting China’s aggressive moves, it could also come at a cost.

To read more about New United States policy towards China visit ( https://compass.rauias.com/current-affairs/countering-the-chinese-rise/ )

Countering the Chinese Rise

Context: The intensifying head-to-head clash between the United States and China has set alarm bells ringing. The beginning was with a trade war in 2018, U.S. policy towards China has morphed into a draconian technology denial regime aimed at hobbling China’s rise. Further the USA is preventing any Chinese military venture to capture Taiwan, for which it has taken major steps across the Indo-Pacific to shore up its military edge. Both China and US are jostling for power and influence across the world. It is to understand that “Extreme competition” over technologies may have initiated the conflict, but their insecurities are increasingly bringing their military and nuclear instruments to the fore.

USA's approach towards China

The United States today is seeking wider international consensus on the new economic approach from its allies and partners, including India. The Unites states is pushing its efforts to build a “New Washington Consensus” as the Washington Consensus has started showing fissures and the lacunas in the approach which are highlighted by the following reasons:

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  • The conviction that the “markets know best” approach led to the hollowing out of the US industrial base. It was argued that in the name of oversimplified market efficiency, entire supply chains of strategic goods along with the industries and jobs that made them moved overseas. It was realised that deep trade liberalisation though helped America export goods, but not jobs and capacity.
  • Secondly the notion that “all growth was good growth”, led to the privileging of some sectors like finance “while other essential sectors, like semiconductors and infrastructure, atrophied”.
  • Thirdly, the old assumption “that economic integration would make nations more responsible and open, and that the global order would be more peaceful and cooperative”, also led to distortion wherein Unites States referred to the premise underlying China’s admission into the WTO in 2001 wherein admitting countries into the rules-based order should have incentivised them to adhere to its rules”. However  the problems triggered by the integration of a “large non-market economy” like China into the WTO.

It was realised that the America’s economic policy must confront the urgent need for a “just and efficient transition” to green economic growth and the political imperative of reducing economic inequality at home that has undermined American democracy. Thus for this purpose the United States has offered a five-fold policy framework under the New Washington Consensus 

  • The first is to return to industrial policy that was the hallmark of US economic development historically, but dismissed by economic neoliberalism in the last few decades. For this the US has restored the role of the state in pumping investments into semiconductor production and promoting the development and deployment of green technologies.
  • Second, the United States under its new approach is not seeking autarky or promoting protectionism. The US is not going alone, and wants to develop a joint effort with US allies and partners, including India.
  • Third, United States wants its friends and partners to look beyond traditional trade policies. Wherein he highlighted the US-proposed Indo-Pacific Economic Framework is not a free trade agreement.
  • Fourth, the US is trying to mobilise “trillions in investment into emerging economies with solutions that those countries are fashioning on their own, but with capital enabled by a different brand” of US economic diplomacy. This primarily involves offering an alternative to China’s Belt and Road Initiative, addressing the global debt crisis, and reforming multilateral development banks.
  • Lastly United States is also pushing the efforts to develop a new set of export controls on sensitive technology that will limit national security threats from China and other rivals.

However International Scholars believe that the new Washington Consensus will face some of the critical challenges as it marred with variety of challenges like

  • CURTAIL NOT CONTAIN: Experts believe that while export controls may slow China, it is impossible to prevent it from developing its own technologies. The Russian experience shows too that sanctions are not easy to work either.
  • UNEQUIVOCAL CHINESE STAND: China does not see much difference between “de-risking” and “containment”. Its immediate response to the G-7 was to order its infrastructure companies to stop buying from American companies. 
  • FISSURES WITHIN WEST: The United States will also face much challenge from its allies as the French President Emmanuel Macron’s has refused to be a vassal state of the U.S., which represents a tip of the iceberg of the worries of its partners in Europe and allies such as South Korea. 
  • ECONOMIC DEPENDENCE: China made up roughly one-third of the U.S. industry’s market and would be “impossible to replace as both a source of components and an end market for its product
  • POLITICS OVER ECONOMICS: While the old Washington Consensus was largely in the area of economics, the new suffers from an overdose of geopolitics which is also feeding into local U.S. politics as well.

CONCLUSION

United states and China seem to be involved in what the Americans call a game of “chicken” which comes with a high risk of miscalculation, war or a messy global economic breakdown.

However, U.S. estrangement with China enhances India’s geopolitical value, something that India wants to capitalise on. But there is also a caution that while the Sino-American hostility may bring benefits to India, a breakdown would be catastrophic, for not just India but also the world.

International Organization for Standardization (ISO)

Context: Recently ISO Member Countries resolve to boost consumer engagement, and renew focus on sustainability in Standardisation.

About ISO

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  •  ISO (International Organization for Standardization) is an independent, non-governmental international organization with a membership of 168 national standards bodies.
  • The ISO story began in 1946 when delegates from 25 countries met at the Institute of Civil Engineers in London.
  • Its headquarters is based in Geneva Switzerland.
  • Through its members, it brings together experts to share knowledge and develop voluntary, consensus-based, market-relevant International Standards that support innovation and provide solutions to global challenges.
  •  An International Standard provides rules, guidelines or characteristics for activities or for their results, aimed at achieving the optimum degree of order in a given context.
  • ISO standards are internationally agreed upon by experts Think of them as a formula that describes the best way of doing something. It provides standards for various sectors like-
    • Quality management
    • Environmental management
    •  Health and Safety
    • Energy management
    • Food safety
    • IT security

Indian appeal at WTO

Context: India has appealed against the ruling made by dispute settlement body of WTO against the Indian government decision of imposition of tariff on mobile phones and electronic components. The case was filed against India by Japan highlighting that India has violated global trading rules under the Information technology agreement (ITA).

It is to understand that resolving trade disputes is one of the core activities of the WTO.

A dispute arises when a member government believes another member government is violating an agreement or a commitment that it has made in the WTO.

GRIEVANCE REDRESSAL MECHANISM UNDER WTO 

  • Dispute settlement is a central pillar of Multilateral Trading System and essential for stability and rule of law global economy. 
  • Dispute Settlement Body: Settling disputes is the responsibility of Dispute Settlement Body, which consists of all WTO members. Dispute Settlement Body has sole authority to establish 'Panels' of experts to consider the case and to accept or reject the panel's findings or results of an appeal. It monitors implementation of rulings and recommendations and has power to authorize retaliation when a country does not comply with a ruling. 
  • First Stage - Consultation: Before taking any other action, countries in dispute talk to each other to see if they can settle their differences by themselves. However, if talks fail, they can ask WTO Director-General to mediate or try to help. 
  • Second Stage - Panel: If consultations fail, complaining countries can ask for a panel to be appointed. The country 'in the dock' can block the creation of a panel once, but when Dispute Settlement Body meets for a second time, the panel must be constituted unless there is a consensus against it. The Panel helps the Dispute Settlement Body makes rulings or recommendations. Since the panel's report can only be rejected by consensus in the Dispute Settlement Body, its conclusions are difficult to overturn. The final report of the panel is the ruling or recommendation of Dispute Settlement Body unless a consensus rejects it. Both sides can appeal the report. 
  • Appeals to Appellate Body: Appeals must be based on points of law such as legal interpretation. Each appeal is heard by three members of a permanent seven-member Appellate Body set up by the Dispute Settlement Body and broadly representing the range of WTO membership. Members of Appellate Body have four-year terms. Members of Appellate Body are individuals with recognised standing in law and international trade, they are not affiliated with any government. An appeal can uphold, modify or reverse the panel's legal findings. Dispute Settlement Body must accept or reject the appeals report and rejection is possible only by consensus. 

Enforcement of decisions: Priority for enforcement actions brings the policies of losing the country in line with the final ruling of WTO Dispute Settlement Body (DSB) and in a reasonable time. If it fails to act within a period of 30 days, the losing side must enter negotiations with the complaining country to determine a mutually acceptable solution. However, if after 20 days, no satisfactory compensation is agreed upon, the winning side may ask DSB to retaliate. Retaliation is a temporary measure, focused on encouraging the losing country to comply. Ex. Winning side can block imports from the losing country. In principle, the retaliation should be in the same sector as the dispute. However, if this is not effective or practical, it can be in a different sector of the same agreement. However, in serious issues, actions can be taken under another agreement also.

MULTI-PARTY INTERIM APPEAL ARBITRATION ARRANGEMENT (MPIA) 

  • It is an interim, alternative mechanism for resolving WTO disputes that are appealed by a Member by arbitrations in the absence of a functioning and staffed WTO Appellate Body. 
  • WTO Appellate Body has been dysfunctional since 2019 due to USA blockage of appointments of members to the Appellate Body of WTO. 
  • Article 25 of Understanding on Rules and Procedures Governing the Settlement of Disputes allows for parties to resolve disputes in the implementation of WTO Rules by arbitration as an alternative to adjudication by panels and the Appellate Body. Under the Article, parties must agree on arbitration and procedures to be followed.
  • MPIA provides that the participating members will resolve disputes by using arbitrations, instead of appealing to the non-functional Appellate Body, when they are unable to accept the adoption of the panel decisions. 
  • Countries participating: Currently, 52 countries and regions, including EU, Australia, Brazil, Canada, China, Singapore, Japan & New Zealand are prominent countries participating in MPIA.

FIPIC (Forum for India Pacific Islands Cooperation)

Context: PM Modi during the recent FIPIC summit communicated that Small island nations of the Pacific Ocean are in fact “large ocean states”, highlighting the importance of the 14 members of the Forum for India Pacific Islands Cooperation (FIPIC). He also spoke in favour of free and open Indo-Pacific region and focused on India’s commitment to assist the development goals of the member-countries.

Mr. Modi also highlighted the close cooperation by explaining Climate change, natural calamities, poverty and famine already existed but now new challenges are emerging as supply chains of food, fuel fertilizer and pharma are facing hurdles. Those we thought were reliable, we came to know they were not standing with us. In this time of difficulty, the old saying that a friend in need is a friend indeed has been proved. From vaccines to medicines, wheat and sugar, India has supplied the countries that needed the items

  • He was also conferred the Grand Companion of the Order of Logohu (GCL), the highest civilian award of Papua New Guinea.
  • PM Modi further unveiled a comprehensive 12-step initiative aimed at advancing India's collaborations with the countries in the Pacific region which included FIPIC SME Development Project, Solar project for Government buildings, Provide desalination units for drinking water, Supply sea ambulances, Set up dialysis units, Set up of 24x7 emergency helpline, Set up of Jan Aushadi Kendras, Set up Yoga centres
  • At the same time members of the FIPIC highlighted that they are victims of global power play and they want India to advocate for them and sit in those meetings,”. They also urged India to serve as the voice of the Global South in the G-7 and the G-20.
  • The recent visit of PM Modi to Papua New Guinea highlights the growing strategic significance of the Pacific Island nations, which have also received attention from China, with the country having signed a security agreement last year with the Solomon Islands.

India and the Pacific Island Nations

  • Historically, India’s interaction with the region goes back to the colonial era, in the early 19th century when Indian workers were taken to the region, to work as indentured plantation labourers, most of whom settled there, particularly in Fiji and PNG.  However in the post-colonial era until recently the region did not find much significance in India’s foreign policy. 
  • In the recent times the changing geopolitical scenario and strategic and economic compulsions have driven India to refresh and redesign its Pacific policy.
  • India's involvement with these 14 nations aligns with its Act East Policy, and the country has primarily fostered its relationships with them through developmental aid as part of South-South Cooperation.
  • The PICs with their resource rich Exclusive Economic Zones (EEZs) can be attractive sources of natural and mineral resources like LNG and hydrocarbons to fuel India’s growing economy and can also provide new markets for its products. Some of the PICs have EEZs that are larger than the landmass and EEZ of India taken together.
  • Further India with its rising naval capabilities begins to look beyond the east of Malacca, the PIC’s would become inevitably significant in India’s broader maritime strategy. 
  • However, India’s interaction with the PICs still largely revolves around its engagement with Fiji and PNG, mainly driven by the presence of sizeable Indian Diaspora
  • Nearly 40 percent of Fiji’s population is of Indian origin and about 3000 Indians live in PNG.
  • In terms of institutional engagements, India participates in the Pacific Island Forum (PIF) as one of the key dialogue partners of the Forum.
  • The most important development in facilitating India’s interaction with the PICs in recent years has been the formation of FIPIC.
  • In 2019 PM Modi announced US$12 million grant (US$ 1 million to each PSIDS) towards the implementation of high impact developmental project in the area of their choice
  • There was also announcement made for a concessional Line of Credit of US$150 million which can be availed by these countries for undertaking solar, renewable energy and climate-related projects based on their requirements.
  • An ‘India-Pacific Islands Sustainable Development Conference’, was also organized in Fiji 2017. The conference focused on discussing the issues including the blue economy, adaptation-mitigation practices for climate change, disaster preparedness and health
  • In 2017, India launched Climate Early Warning Systems in seven PICs. India has regularly provided assistance in these counties to deal with consequences of frequent cyclones like the relief and rehabilitation grant was provided when Tropical Cyclone Hola hit Vanuatu in 2018.
  • India has also offered a Line of Credit set up a pharmaceutical manufacturing plant and the distribution centre in the Pacific Island region for access to affordable drug and has 
  • Further, India has provided financial assistance for the Small and Medium Enterprise (SME) sector in these countries, helping many small scale entrepreneurs to develop their own business.
  • At this moment, total annual trade of about $300 million between the Indian and Pacific Island countries, whereas exports are around $200 million and imports are around $100 million.

Recent Developments in the region:

Located between the US, China and Australia, the Pacific island countries hold strategic importance for security and defence. The US has long maintained influence and a military presence in the Pacific region. Over the last decade, China has focused on strengthening its ties in Pacific through increased aid development, diplomacy and security cooperation.

  • The area gained prominence when in 2022, Solomon Islands signed a security pact sparking international concern over the possibility of Beijing building its first military base in the region.
  • China has also signed off on a variety of smaller bilateral agreements during the same tour. To counter the move, newly appointed Australian Foreign Minister, immediately travelled to Fiji, Samoa and Tonga to shore up Australian diplomatic interests in Oceania
  • ISOLATION OF TAIWAN: Strategist are of the opinion that China would use the island countries to further isolate Taiwan from the diplomatic support it receives from the region. 
  • Several countries in Oceania (The Marshall Islands, Nauru, Palau, and Tuvalu) recognize Taiwan as a sovereign country. Chinese outreach and development manoeuvrings could therefore help them reduce regional support for Taiwanese independence. 
  • As a testimony to this Honiara has recently cut ties with Taiwan and followed Beijing’s line on the “One China” policy. The “Inter-governmental Framework Agreement on Security Cooperation” between Beijing-Honiara is a culmination of these efforts.
  • ISOLATION OF AUSTRALIA: Increased Chinese influence in the region could lead to more overseas military bases being built, and could lead to Australia, a vital Pacific ally for the United States, to be isolated, cutting them from supply lines from overseas.
  • THE ZERO SUM GAME IN PACIFIC: China’s engagement with South Pacific is about increasing its influence and about diminishing American and Australian influence. It’s a zero-sum game. Australia has a security cooperation agreement with Honiara and is a preferred security provider. Australia went from being a “key security provider” to becoming “one of the options” to seek out.
  • GREAT GAME IN PACIFIC: The US’ posture and initiatives in Indo-Pacific are also worrying China. US’ Indo-Pacific strategy outlines that it is keen to focus on “every corner of the region including the Pacific Islands. Further the formation of Quad and US’ Indo-Pacific strategy have worried China, so this game of influence will further intensify.
  • REGIONAL ECONOMICS: The Pacific region is also an important route to transport products and natural resources. Further the exports from Australia (as Australia supplies critical minerals like that of iron ore, coal, and raw cotton and exports to important allies like Australia and other countries like New Zealand pass through this sea area. 
  • CLIMATE HAZARDS: Many Pacific Island nations are worried of the impact of climate change and rising sea levels, which pose an immediate existential threat. In fact, the Fijian Defence Minister, in the recent Shangri-La Dialogues that the greatest threat to the region is not a conflict between China and the U.S., but rather the geopolitical effects of climate change.

CONCLUSION: 

As two geopolitical superpowers start to compete for political dominance in the region, the region as a whole now risks being dragged into conflicts, being used as pawns in broader global ambitions, and at the worst, could see themselves as the site of an armed conflict.

India-Australia ties

Context: Prime Minister Narendra Modi’s visit to Australia. The visit which was originally planned for a multilateral event, the meeting of the Quad, it transformed into a purely bilateral visit after the U.S. President pulled out over domestic political constraints; Japanese Prime Minister Fumio Kishida followed suit, and a shortened Quad Summit was held in Hiroshima. As a result, PM visit to Australia was much more in the spotlight.

It needs to be highlighted that that purpose of such visits is conducive to strengthening the common understanding between both countries, or in the best interests of the “three D’s” i.e.— Democracy, Diaspora and Dosti [Friendship] as earlier reiterated by PM Modi.

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During the recent visit the discussions focused in multiple areas with areas covering like that of cooperation in defence and security, trade and investment, new and renewable energy, green hydrogen, critical minerals, education, migration and mobility and people to people ties

  • Institutionalisation of India-Australia Summit:  India & Australia has upgraded their relationship to Annual bilateral summits at the highest political level in 2023. A Consulate General of India in Brisbane was also established highlighting the growing trust, convergence of interests among the two middle powers. 

India & Australia have already raised their relationship status to India-Australia Comprehensive Strategic Partnership level. 

  • Strategic aspect of relations: The leaders also reiterated their determination to ensure a peaceful, prosperous and inclusive Indo-Pacific region, underpinned by a rules-based international order. They also discussed reform of UN Security Council.

Australian leader also expressed strong support to India's G20 Presidency and initiatives.

  • Economic aspect of relations: Australia has a large number of expatriate Indians to contribute to its economy. Also, it is a place where large number of Indian students go for higher education and employment. In this respect, the signing of India-Australia Migration & Mobility Partnership Agreement will further facilitate mobility of students, professionals, researchers, academics. This will be done through a new skilled pathway named MATES (Mobility Arrangement for Talented Early Professionals Scheme) specifically created for India.
  • A Business Roundtable with CEOs of top Australian companies was also organised, and the business leaders were invited to invest in India in areas particularly including that of  digital infrastructure, IT, fintech, telecom, semiconductors, space, renewable energy including green hydrogen, education, pharma, healthcare including medical devices manufacturing, mining including critical minerals, textile, agriculture & food processing.
  • Partnership in emerging technologies: The two countries have also finalized Terms of Reference of the India-Australia Hydrogen Task Force, to focus on deployment of clean hydrogen, fuel cells etc highlighting the cooperation in areas beyond traditional spheres of diplomacy.

However despite of the increasing cooperation between the two countries there are still deep challenges that exist between two countries

Challenges in India-Australia Ties 

  • Dichotomous Australian foreign policy: There is some misalignment in Australia’s economic and political interests. Though Australia has been actively engaging with India and US as part of QUAD grouping, its economy still depends on China owing to its huge share in bilateral trade and investment. 
  • Lingering CECA: Comprehensive Economic Cooperation Agreement (CECA) has not yet materialised though the negotiation started in 2011. This is a hindrance to the bilateral trade. 
  • Withdrawal from RCEP: One reasons for India’s withdrawal from RCEP was objection from farmer organisations and diary cooperatives due to fears of flooding of cheaper agricultural and dairy products from Australia. 
  • Challenges in Indian economy: Australia feels India is too complicated for its growth story to be linear and has scepticism about India’s economic progress, which is constrained by political compromise, burdened by interfering bureaucracy , dented by corruption and shaped by a political tradition which puts greater faith in government intervention than the efficiency of market.

Forum for India-Pacific Islands Cooperation (FIPIC) Summit

Context: Prime Minister of India has gone to Papua New Guinea to attend the 3rd Forum for India-Pacific Islands Cooperation (FIPIC) Summit.

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About Forum for India-Pacific Islands Cooperation (FIPIC)

The Forum for India–Pacific Islands Cooperation (FIPIC) was launched during Hon'ble Prime Minister, Mr. Narendra Modi's visit to Fiji in November 2014.

Member Islands: Cook Islands, Fiji, Kiribati, Marshall Islands, Micronesia, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.

India's focus has largely been on the Indian Ocean where it has sought to play a major role and protect its strategic and commercial interests. The FIPIC initiative marks a serious effort to expand India's engagement in the Pacific region.

At this moment, total annual trade of about $300 million between the Indian and Pacific Island countries, whereas exports are around $200 million and imports are around $100 million.

Areas of Cooperation: 

  • Special USD one million fund for adapting to climate change and clean energy,
  • Establishing a trade office in India. 
  • Pan Pacific Islands e-network to improve digital connectivity. 
  • Extending visa on arrival at Indian airports for all the 14 Pacific Island countries.
  • Cooperation in space technology applications for improving the quality of life of the islands, and training to diplomats from Pacific Island countries. 
  • In addition, India has increased the annual "Grant-in-Aid" from USD 125,000 to 200,000 to each of the 14 Pacific Countries for community projects of their choice, and launched a new Visitors Programme for Pacific Island Countries.
  • The second summit of the Forum for India Pacific Cooperation (FIPIC-2) in Jaipur on 21-22 August 2015 has made significant progress in strengthening India's engagement with the 14 Pacific Island countries.
  • During the second summit of FIPIC, Hon'ble Prime Minister has announced FIPIC Trade Office at Federation of Indian Chambers of Commerce & Industry (FICCI) to promote Trade & Investment opportunities between India & Pacific Island Countries.

The main objectives of the business accelerator are:

  • Provide necessary information and facilitation to businessmen on both sides regarding prospects of Trade and Investment
  • Facilitate meetings between the concerned businessmen from both sides
  • Exchange of business delegations between India and Pacific Islands Countries (PICs)
  • Online & Offline Match Making Services
  • Organising Events/ Trade Fairs

International North South Transport Corridor

Context: The project was first mooted in 2000  and despite its perceived potential and the keenness shown by key powers, there was little progress on the project’s implementation for years. One of the reasons was the western sanctions on Iran over its nuclear programme. However, Russia’s February 2022 invasion of Ukraine, after which it was sanctioned by the West, seems to have brought Moscow and Tehran closer, giving a fresh impetus to the NSTC. In February this year, President Vladimir Putin said in his State of the Nation address that Russia was developing the NSTC, which would open up new routes for trade with India, Iran, Pakistan as well as Gulf countries. Recently, Mr. Putin and his Iranian counterpart Ebrahim Raisi virtually participated in a ceremony where both countries signed an agreement to develop the 162-km Rasht-Astara railway, a critical link in the NSTC.

ABOUT INSCTC

  • The INSTC is a 7,200 km-long multimodal transportation network encompassing sea, road, and rail routes to offer the shortest route of connectivity. 
  • It links the Indian Ocean to the Caspian Sea via the Persian Gulf onwards into Russia and Northern Europe. It is aimed at reducing the carriage cost between India and Russia by about 30 percent and bringing down the transit time by more than half.
  • It was launched in 2000 with India, Russia, and Iran as its founding members and work on actualizing the corridor began in 2002. 
  • Since then, INSTC membership has expanded to include 10 more countries – Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Ukraine, Syria, Belarus, and Oman. Bulgaria has been included as an observer state. The Baltic countries like Latvia and Estonia have also expressed willingness to join the INSTC.

The INSTC spirals across the following corridor:

  • Central corridor: It begins from the Jawahar Lal Nehru port in India’s western state of Maharashtra (in the Indian Ocean Region) and connects to the Bandar Abbas port on the Strait of Hormuz. It then passes through the Iranian territory via Nowshahr, Amirabad, and Bandar-e-Anzali, runs along the Caspian Sea to reach the Olya and Astrakhan Ports in Russia.
  • Western corridor: It connects the railway network of Azerbaijan to that of Iran via the cross-border nodal points of Astara (Azerbaijan) and Astara (Iran) and further to Jawaharlal Nehru port in India via sea route.
  • Eastern corridor: It connects Russia to India through the Central Asian countries of Kazakhstan, Uzbekistan, and Turkmenistan. 

BENEFITS:

  • REDUCED COST: INSTC boasts of the shortest trade route connecting India with Russia. Reports indicate INSTC was 30 percent cheaper and 40 percent shorter than the traditional Suez route, slashing the transit time to an average of 23 days for Europe-bound shipments from the 45-60 days taken by the Suez Canal route.
  • INCREASED ACCESS: Cheaper cost of transport will lead to increased competitiveness of Indian exports, opening access to unfulfilled markets.
  • LOGISTICS HUB: Under the agreement, Iran and Azerbaijan are expected to develop into transit hubs. In India, Nagpur and Bhiwandi from Maharashtra state are identified as potential logistics hubs. 
  • SUPPLY CHAINS: The creation of diverse supply chains across Eurasia might surely alter the stereotype of East as the producer and West as the consumer.
  • INCREASED TRADE VOLUME: India’s trade with Russia and Central Asian countries highlight that he main reason for low trade with the landlocked Central Asian countries is lack of connectivity, which has now been taken care of with Iran’s Chabahar Port. The INSTC will not only enhance physical connectivity but will also improve knowledge and information sharing mechanisms.
  • ENERGY AS A COMMODITY: As India is one of the largest consumer and is dependent on the area to meets its energy demand.
  • Synchronization of INSTC with Ashgabat Agreement and Organization of the Black Sea Economic Cooperation (BSEC): Linking INSTC to existing transport initiatives in the Central Asian region like BSEC (Europe-centric) and the Ashgabat Agreement (Central Asia-centric) will expand trade linkages and opportunities in the region.
  • Potential materialization of free trade agreements (FTAs) in the region: There have been talks of signing an FTA between India and the Eurasian Economic Union (EAEU): It will provide the much-needed impetus to the trade momentum between different countries in the region. Access to the EAEU nations alone will open India to a market of 173 million people.
  • Possible synchronization with Baltic, Nordic, and Arctic corridors in the future: Alongside the North Sea-Baltic Corridor, INSTC may synchronize with the Scandinavian-Mediterranean (ScanMed) Corridor and the planned Arctic Corridor in the future.

CHALLENGES IN MATERIALIZATION

  1. Firstly, Iran wants to increase its role as a transcontinental transit country. Yet the problem is that, the infrastructure which remains hampered by US sanctions. There is also a major shortage of transit wagons and relatively poor road infrastructure which makes it difficult to sustain higher levels of traffic. 
  2. There are other practical problems such as the lagging construction of 22 tunnels and the construction of 15 special bridges along the corridor in Iran. At the same time, there is no single railway gauge option adopted for the route. The Russian standard of gauge of railways and that in Iran is different. Obviously, this would make the operation of the INSTC less smooth.
  3. The financial situation in both countries remain heavily sanctioned. While the Ukraine conflict continues and Iran’s nuclear negotiations remain stymied, Western restrictions are likely to remain in place. In normal times Russia is arguably the only power which would be able to finance the remaining Rasht-Astara railway section. With the sanctions the prospects seem less promising.
  4. Further tensions are also persistent in Azerbaijan-Russia relations. Amid the Ukraine conflict and Azerbaijan’s increasingly coercive position toward Armenia, Baku’s push to have Russian peacekeeping forces withdrawn from Nagorno-Karabakh by 2025 becomes ever more evident.
  5. Iran is also suspicious about Russia’s strategic goals and interests in the South Caucasus and the Middle East. Even on such issues as the provision of Iranian military drones to Russia, Iranian politicians appears deeply divided.

The G7 Summit

Context: U.S. President Joe Biden at the Group of Seven (G-7) nations meet had agreed on a united approach to China that called for diversifying supply chains to reduce dependence on one country. The leaders explained that they are not looking to decouple from China rather they are  looking to de-risk and diversify our relationship with China.

On the issue of tensions between China and Taiwan, there was a clear understanding among most of the allies that if China were to act unilaterally against the self-governed island Taiwan, there would be a response.

Further at the summit on side-lines of the G7 meet Prime Minister Narendra Modi met with Ukrainian President Volodymyr Zelensky and ensured that  India will do “everything” necessary to resolve the war in Ukraine.

What is the agenda for G7 Summit this year?

  • Launch the Hiroshima Action Statement for Resilient Global Food Security with partner countries to address needs today and into the future; and
  • Deliver our goal of mobilizing $600 billion in financing for quality infrastructure through the Partnership for Global Infrastructure Investment (PGII)
  • Member reiterated the importance of a free and open Indo-Pacific, which is inclusive, prosperous, secure, based on the rule of law, and that protects shared principles including sovereignty, territorial integrity, peaceful resolution of disputes, and fundamental freedoms and human rights
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About G7 

  • The Grouping began as the Group of Six in 1975- with a meeting of leaders of US, UK, West Germany, Italy, France and Japan, because of the Oil crisis and global currency exchange issues that decided to meet annually. 
  • The Group of 7 (G7) is an informal group of seven countries — the United States, Canada, France, Germany, Italy, Japan and the United Kingdom, the heads of which hold an annual summit with European Union and other invitees 
  • Together the member countries represent 40% of global GDP and 10% of the world’s population 
  • G7 has no legal existence, permanent secretariat or official members 
  • Leaders of G7 countries meets annually and discusses emerging global issues 
  • India has been a special invitee to the G-7 on several occasions in past two decades- including 5 consecutive years from 2005-2009 during global economic crisis. This year Indian PM was invited at summit. 

Challenges faced by G7

  • Changing Economic Situation: When constituted the G7 countries accounted for close to two-thirds of global GDP. 
  • They now account for less than a third of global GDP on a purchasing power parity (PPP) basis, and less than half on market exchange rates (MER) basis 
  • Seven largest emerging economies (E7, or “Emerging 7”), comprising Brazil, China, India, Indonesia, Mexico, Russia and Turkey, account for over a third of global GDP on purchasing power parity (PPP) terms, and over a quarter on MER basis.
  • It is a “First World Elite Club” that has not grown its membership to include emerging economies like India and China. 
  • By cutting out Russia and China, the G-7 ensure the polarisation of the world into the two blocs, even as ties between Russia and China get stronger. 
  • G-7 countries are also military partners means that the economic agenda of the grouping often takes a backseat over political issues 
  • G7 failed to head off the economic downturn of 2007- 08, which led to the rise of the G20. 
  • Contemporary issues missed: G7 has not raised concerns with respect to contemporary issues, such as the COVID-19 pandemic, climate change, the challenge of the Daesh, and the crisis of state collapse in West Asia. 
  • No Concrete Plan: It had announced its members would phase out all fossil fuels and subsidies but has not so far announced any plan of action to do so. 
  • Unlike other institutions, G7 is not a formal institution with a charter and a secretariat. 
  • Lacks representation: Russia, China and India which are influential global players with important role in global economy are not members of this group.
  • Internal Divisions: US president Donald trump had challenged the unity of G7 members stating that contending that U.S. allies took advantage of the United States. 
  • There is a growing sense that China poses a “threefold threat” to G7 countries—economically, ideologically, and geopolitically. 

Way forward for G7 and India

  • A new mechanism is required to handle the emerging global challenges - Trade war, economic slowdown, Political turmoil in countries, counterterrorism & non- proliferation. 
  • There is need for including in it the seven future leading economies, plus Germany, Japan, the U.K., France, Mexico, Turkey, South Korea, and Australia 
  • Finding effective solutions to burning issues like Ukraine war, Global economic slowdown, Iran's nuclear program, peace and stability in Afghanistan, Gulf and West Asia, reduction in tensions in Korean peninsula and South China Sea. 
  • India’s tightrope walk between the West and Russia- China has just become more difficult- the G7 statement indicates a point of no-return 
  • The US-China rivalry is likely to step up in the Indo- Pacific with the new economic initiatives planned: from Indo-Pacific Economic Forum to the PGII to counter China’s Belt and Road Initiative- India joined the IPEF but India has not signed on to the PGII plan yet. 
  • India’s partnerships with countries like Indonesia, Brazil. South Africa, ASEAN etc that are still seeking to balance ties with both blocs will get stronger. 
  • India’s role as the balancing power in the room is evident: at the BRICS summit last week, India ensured that anti-West language did not enter the text, while at the G-7 outreach, it ensured that statements condemning Russia and China were not part of the documents that India signed. 

World Meteorological Organization

Context: In the final report released by the expert group setup by WMO  highlighted a general negative association between temperature and Covid 19 transmission. The expert group was setup in 2020 to assess whether meteorological factors like heat and humidity had any role to play in transmission of Covid 19 virus.

About WMO

  • WMO is a specialized agency of the United Nations (UN) with 193 Member States and Territories.
  • It is the UN system's authoritative voice on the state and behaviour of the Earth's atmosphere, its interaction with the land and oceans, the weather and climate it produces and the resulting distribution of water resources.
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Origin

  • WMO originated from the International Meteorological Organization (IMO), which was founded in 1873 to facilitate the exchange of weather information across national borders.
  • Established in 1950, the WMO became a specialized agency of the United Nations in 1951. Its mandate is in the areas of meteorology (weather and climate), operational hydrology and related geophysical sciences.
  • It has fostered collaboration between the National Meteorological and Hydrological Services of its Members and furthered the application of meteorology in many areas.
  • In collaboration with other United Nations agencies and National Meteorological and Hydrological Services, WMO supports the implementation of a number of environmental conventions and is instrumental in providing advice and assessments to governments on related matters. These activities contribute towards ensuring the sustainable development and well-being of nations.

Governance Structure

  • Secretariat: The Secretariat, headquartered in Geneva, is headed by the Secretary-General.
  • In June 2019, the World Meteorological Congress approved a reform of the WMO governance and a vision for 2030 as well as other changes that called for an overhaul of the structure of the Secretariat. One of the most important changes implemented thus far is the creation of a Board of Directors.
  • WMO undertakes this task through the National Meteorological and Hydrological Services of its Members, which own and operate the systems for collecting, processing and analysing information from thousands of observation systems, including satellites and ships. It also ask Services to develop climate change detection tools and software to compute indices that reflect the best estimate of climate trends within the countries.
  • WMO issues Annual, Five-Year and Decadal Statements on the Status of the Global Climate. These statements document extreme weather and climate events in the regional context and provide a historical perspective on the variability and trends of climate, particularly surface temperatures that have occurred since the 19th century.
  • India is a member of WMO. It has been the member since 1949 and India’s permanent representative is the head Director General of Meteorology of the IMD.

WMO reports

  1. Green House Gas Bulletin 
  2. Status of World Climate

Canada-China Kerfuffle

Context: The Canadian government declared Chinese diplomat Zhao Wei “persona non grata,” for allegedly targeting a Canadian lawmaker critical of China’s human rights record. Hours later, China announced a “reciprocal countermeasure” by asking Jennnifer Lynn Lalonde, a top diplomat in the Canadian consulate in Shanghai, to leave the country by May 13. Tensions soared with China saying it holds the “right to take further actions in response”, while Prime Minister Justin Trudeau put out a strongly worded statement, reiterating that Canada will not be intimidated.

History of straining Canada-China ties?

  • Diplomatic ties between China and Canada have been unsteady for the past few years, especially after Canadian police arrested Huawei Technologies executive Meng Wanzhou on charges of fraud in 2018. A few days after her arrest, China detained two Canadians on spying charges a move then called “hostage diplomacy”
  • China had suspended imports of canola from Canada, alleging pests in the shipment
  • Canada has also alleged that the Chinese government attempted to interfere in the 2019 and 2021 federal elections a charge Beijing vehemently denies.
  • The two countries are also engaged in a technology battle. While Canada has limited the presence of Chinese firms in its communications infrastructure, Beijing believes the restrictions were imposed without any solid evidence.
  • The tension between the leadership was also visible at the G-20 summit in Indonesia last year, when Chinese President Xi Jinping and the Canadian PM exchanged barbs over leaked details of their meeting about Chinese interference in domestic affairs.

The Recent Spat:

  • At the centre of the latest spat is a report from the Canadian Security Intelligence Service (CSIS)
  • A series of media reports also highlighted about growing Chinese interference in Canada, a report on an intel document from 2021 which detailed potential threats to opposition lawmaker Michael Chong and his family in Hong Kong over the latter’s criticism of Beijing. Citing an anonymous national security official as its source, the newspaper reported that Chinese consul Zhao Wei was involved in gathering information about Mr. Chong and his family in Hong Kong to target him over his anti-Chinese sentiments 
  • Michael Chong was targeted because he led legislative efforts in Canada’s House of Commons to declare China’s treatment of Uyghurs and other minorities in Xinjiang as “genocide”. In response, Beijing barred his entry into China.
  • After details of the CSIS report were revealed, the Canadian government was heavily criticised for its inaction against China. Internal deliberations followed about the future course of action, seemingly to prepare for any economic repercussions since China is Canada’s second-biggest trade partner.
  • Canada declared diplomat Zhao Wei “persona non grata” (Latin for an unwelcome person). Canada reiterated that it would “not tolerate any form of foreign interference in our internal affairs.”
  • China also responded strongly on actions of Canada, warning of retaliatory measures. 
  • Chinese Foreign Ministry spokesperson Wang Wenbin had urged Canada to stop “unreasonable provocations”. Later China issued an order asking Ms. Lalonde to leave the country.

Conclusion:

The future course of diplomatic relations between the two countries will be sharply observed by neighbouring countries like USA, India etc which are themselves having contentious relationship with China and are apprehensive of aggressive rise of China at regional and global level.

Washington Consensus

Context: As Prime Minister Narendra Modi steps up engagement with the US and its allies — at the G7 summit in Hiroshima this week, the Quad summit in Canberra week after, and bilateral visits to Washington and Paris in June and July— the restructuring of the global economic order will figure high on India’s bilateral and multilateral agenda. In the geopolitical domain and so in the geoeconomic, there is a growing convergence of interests between Delhi and Washington. Translating that into concrete outcomes will demand much hard work and some creative solutions

  • The United States today is seeking wider international consensus on the new economic approach from its allies and partners, including India. The Unites states is pushing its efforts to build a “New Washington Consensus” as there is also a  geoeconomic competition between Washington and Beijing which had begun to develop in the Trump years and President Joe Biden has intensified it and lent a plausible ideological framework to it.
  • The term “Washington Consensus”, which gained ground in the late 1980s, referred to the shared prescriptions from the International Monetary Fund, World Bank, and US Treasury on deregulation, privatisation, and free trade for economic modernisation. By the 1990s, these recommendations gained widespread policy traction in the chancelleries of the world, including in India.

However the Washington Consensus has started showing fissures and the lacunas in the approach which are highlighted by the following reasons: 

  • The conviction that the “markets know best” approach led to the hollowing out of the US industrial base. It was argued that in the name of oversimplified market efficiency, entire supply chains of strategic goods along with the industries and jobs that made them moved overseas. It was realised that deep trade liberalisation though helped America export goods, but not jobs and capacity.
  • Secondly the notion that “all growth was good growth”, led to the privileging of some sectors like finance “while other essential sectors, like semiconductors and infrastructure, atrophied”.
  • Thirdly, the old assumption “that economic integration would make nations more responsible and open, and that the global order would be more peaceful and cooperative”, also led to distortion wherein Unites States referred to the premise underlying China’s admission into the WTO in 2001 wherein admitting countries into the rules-based order should have incentivised them to adhere to its rules”. However  the problems triggered by the integration of a “large non-market economy” like China into the WTO.

It was realised that the America’s economic policy must confront the urgent need for a “just and efficient transition” to green economic growth and the political imperative of reducing economic inequality at home that has undermined American democracy. Thus for this purpose the United States has offered a five-fold policy framework under the New Washington Consensus 

  • The first is to return to industrial policy that was the hallmark of US economic development historically, but dismissed by economic neoliberalism in the last few decades. For this the US has restored the role of the state in pumping investments into semiconductor production and promoting the development and deployment of green technologies.
  • Second, the United States under its new approach is not seeking autarky or promoting protectionism. The US is not going alone, and wants to develop a joint effort with US allies and partners, including India.
  • Third, United States wants its friends and partners to look beyond traditional trade policies. Wherein he highlighted the US-proposed Indo-Pacific Economic Framework is not a free trade agreement.
  • Fourth, the US is trying to mobilise “trillions in investment into emerging economies with solutions that those countries are fashioning on their own, but with capital enabled by a different brand” of US economic diplomacy. This primarily involves offering an alternative to China’s Belt and Road Initiative, addressing the global debt crisis, and reforming multilateral development banks.
  • Lastly United States is also pushing the efforts to develop a new set of export controls on sensitive technology that will limit national security threats from China and other rivals.

ABOUT WASHINGTON CONSENSUS

A list of policies that had gained support among Latin American policymakers in response to the macroeconomic turbulence and debt crisis of the early to mid-1980s. These policies also had the backing of experts at Washington's international institutions—especially the International Monetary Fund and the World Bank, as well as the US Treasury—to help the recovery from the debt crisis and popularly came to be known as Washington Consensus

  1. Fiscal Policy discipline, with avoidance of large fiscal deficits relative to GDP;
  2. Redirection of public spending from subsidies ("especially indiscriminate subsidies") toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment;
  3. Tax reform broadening the tax base and adopting moderate marginal tax rates;
  4. Interest Rates that are market determined and positive (but moderate) in real terms;
  5. Competitive exchange rates  
  6. Trade liberalization: liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs. 
  7. Liberalization of inward foreign direct investment
  8. Privatization of state enterprises 
  9. Deregulation: abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institution 
  10. Legal security for property rights. 

INDIA AND WASHINGTON CONSENSUS

  • Pursuit of this policy resulted in annual economic growth breaking out of the 3 to 5 percent band of the pre-1991 era. But redistribution of the extra wealth has been skewed. Those already better off have improved their living standards further whereas the large majority who lagged behind before have stagnated or grown poorer.
  • The emphasis of the WTO and the IMF on export-led growth encouraged cultivators to switch from food crops to fertilizer-intensive cash crops like cotton, coffee, sugarcane, groundnuts, pepper and vanilla. As a consequence, the daily per capita availability of food grains declined from 510 grams in 1991 to 422 grams in 2005.

Conclusion

It is for India to understand that the common themes in the economic strategies are many and these include China’s geoeconomic challenge, the dangers of dogmatic commitment to globalisation, the need for industrial policy to develop national manufacturing, technological cooperation among like-minded partners, building resilient supply chains, addressing the economic concerns of the Global South, and reforming the global financial institutions.

It is also important to understand that there will also be many disagreements on the identification of priorities as well as on the details of the specific outcomes in rearranging the global economic order. But Building on new opportunities and resolving new problems must be viewed as a historic opportunity for India’s economic statecraft. As the US is ready for substantive engagement with its partners and Delhi must be ready to respond.

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