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US China Conflict in Asia Pacific

Context: As Prime Minister Narendra Modi heads to Washington for a state visit in two weeks, the unfolding geopolitical churn in Asia triggered by China’s rise will form a critical background to his talks with US President Joe Biden. In two and a half years, US has made significant strategic gains and reversed the dominant perception that China’s domination of Asia is inevitable and America’s retreat is irreversible.

Recent Development

  • The annual Shangri-La Dialogue, which concluded its 20th edition in Singapore witnessed the discussion on changes to capture the shifting strategic trends in Asia. 
  • The dialogue highlighted the deepening tensions between the US and China. There was an understanding to mobilise a broad-based coalition to balance China, the United States is seeking to resume high-level talks between the two sides and focus on confidence-building measures to prevent the tensions from escalating into a hot war.
  • The US has drawn in its closest partners — the UK, Australia, New Zealand, and Canada – into the grand regional coalition. Acting on the same lines Australia has outlined its strategy of engagement with China while standing up to Beijing’s military bullying.
  • United States has elevated the Quad to the summit level.
  • It has also unveiled the AUKUS high-tech alliance with the UK and Australia. 
  • It has launched trilateral coordination with South Korea and Japan.
  • It also unveiled a “local quad” along with Australia, Japan, and the Philippines to counter the Chinese military pressures against Manila.
  • The US has been encouraging Japan to raise its military capabilities, modernising the military alliance with South Korea
  • US is also revitalising its frayed military partnership with Manila and enhancing security cooperation with Indonesia.
  • Further, NATO is now raising its game in Asia. For example, Japan has taken the lead in drawing Europe into Asian security and South Korea is ready to join hands. On the other hand, Australia and New Zealand now participate in NATO deliberations,
  • There is also a push for building a stronger strategic partnership with India, which has been a high priority for the US administration, and for the same a “road map” for a significant elevation of bilateral defence cooperation, including technology transfers and joint defence industrial production was recently agreed upon.

About  Indo – Pacific

The term Indo-Pacific which was first used in geo-political context by an Indian Navalist in a journal article. It was later used by Japanese Prime Minister Shinzo Abe’s speech in the Indian Parliament titled “Confluence of the Two Seas” in 2007. The term Indo-Pacific found its place in India’s official communiqués 2014 & recently Ministry of External Affairs has established an Indo-Pacific division within the ministry, considering India’s growing interests within that region.

Free & Open Indo-Pacific

  • Assertion for Free and Open Indo-Pacific by major powers can be considered a reaction to militarization of waters in Indo-Pacific, South China Sea (SCS) in particular, and emergence of Chinese economy and military across Asia & Africa. The assumption is that “freedom of navigation” is being or might be constrained by increased military presence in the SCS by China’s navy. It is worth noting that China continues to support the freedom of commercial shipping in the seas of the Indo-Pacific.
  • There is a fear among ASEAN members that Indo-Pacific is becoming a closed region due to major power rivalries including India, China, US and Japan and therefore ASEAN intends for a free and open Indo-Pacific.
  • As per Japan, the “Free and Open Indo-Pacific Strategy” seeks to improve “connectivity” between the Pacific and the Indian Oceans. In pursuit of this, Japan aims to strengthen strategic collaboration with India, the US and Australia. 
  • The US vision of a free and open Indo-Pacific has three components – economic, governance and security. The US seeks greater economic engagement with countries of the Indo-Pacific, maintenance of international law in Indo-Pacific region and primacy of U.S. navy and not of China in the region.

Indian Vision of Indo-Pacific

  • India put forth India’s vision of the Indo-Pacific at the Shangri La dialogue, 2018. The view was consistent with the overall norms enunciated by regional powers, including the US, Japan, Australia and Indonesia with the emphasis on ASEAN centrality in Indo-Pacific.
  • India has asserted that it will not take sides but chooses the side of values and principles which are commonly embraced with ASEAN based upon as Free & open Indo-Pacific.
  • India is evolving its regional role to encompass the Indo-Pacific and Eurasian region to ensure a balanced multipolar world.
  • India would continue to maintain its strategic autonomy irrespective of the prevailing geo-politics to ensure stability in power relations in Asian region among the great powers.
  • India will not be a part of closed group of nations or aggregate Indian power in any bloc and India's friendship with any nation should not be mis-construed as an alliance.
  • India's growing engagement in the Indo-Pacific region should not be considered anti-China.
  • India continues to maintain multi-literalism as form of foreign policy engagement with parallel interactions (E.g., SCO & Quad) based on respective common mutual interests.

Differences in Vision with others

  • Japan is primarily focused upon South China Sea, while India’s security is focused primarily towards Bay of Bengal and to Arabian Sea.
  • US does not follow ASEAN centrality in Indo-Pacific architecture. It has aligned with UK and Australia to form AUKUS which is a military partnership focusing on transfer of Nuclear submarine technology to Australia.
  • Chinese military installations have expanded towards Arabian Sea and Bay of Bengal, but India has not done similarly in South China and East Asia Sea.
  • India intends to become both a maritime & continental power in Asia, but Japan and USA are focused on maritime capability.
  • Major powers have constituted military alliances in Indo-Pacific region, but India has chosen not to indulge in military alliances.

India & Indo-Pacific 

With rise of China, India's Foreign policy seems to focusing on strategic and military considerations which is visible in its collaboration with USA and renewed focus on Indo-Pacific and the Quadrilateral security dialogue. However, there are differences in the understanding of the concepts of Indo - Pacific and the Quadrilateral grouping. Further there are hurdles in India’s strategy with regards to the Indo-Pacific and the Quad. So let us understand, the issues faced by India and what should be India's approach to clearly outline its interest in the Indo-Pacific and the Quad. Indo – Pacific vs Quad: Indo-Pacific is a grand politico-economic vision while Quad is a forum for common issues in the region concerning India, U.S., Australia and Japan. 

Similarities in Indo-Pacific & the QUAD

  • Quad members are major States in Indo-Pacific region, and both Quad and Indo-Pacific constructs are focused on China.
  • They are also in some ways centered around India’s geographic location and its policies. 

Differences

  • The Indo-Pacific provides a complex political and economic construct aimed challenging China strategically. The Quad on the other hand is inherently more anti-China in character and intent.
  • The Indo-Pacific has subtle anti-China undertones. But the Quad’s ability to succeed would entirely depend on China — the more aggressive China gets, the more resolute the Quad countries would be in strengthening it. 

Hurdles in India's Strategy

  • For a politico-economic construct such as the Indo-Pacific to survive, there must be strong economic partnerships and linkages among its members.
  • Merely focusing on strategic talk will not work. 

Indian Economic Engagement with Indo-Pacific

  • India's recent decision not to join Regional Comprehensive Economic Partnership (RCEP), region’s flagship free trade arrangement, could potentially complicate its future engagements in the region.
  • There is huge gap between India and China on trade with every Indo-Pacific country.
  • This growing trade gap that India and China have with these countries will be a major determining factor in shaping the region’s strategic realities.
  • Further India's decision not to sign on to the RCEP also needs to be viewed in the broader context of the Chinese institutional engagement of the region.
  • India does not have FTAs with New Zealand, the U.S., Bangladesh and the Maldives. It has FTAs with South Korea, the Association of Southeast Asian Nations, or ASEAN, Japan and Sri Lanka.
  • In the case of China, it has FTAs with all these countries barring the U.S.
  • This shows that economic compulsions will go a long way in shaping strategic realities for a variety of reasons including that trade with China is crucial for the economies of these States.
  • Thus, strategic talks need to be aligned with the economic realities for the success of the Indo-Pacific.

Military engagement

  • Even on this front India lags China.
  • China is a major defence supplier to several region’s States including Bangladesh, Myanmar, Sri Lanka, Indonesia, Malaysia, the Philippines, and Thailand.
  • While India has minimal sales, defence dialogues and occasional joint military exercises in the region. However, India’s decision to supply Brahmos to Philippines is a step in the right direction.

Way forward

  • India’s role in the Indo-Pacific will remain limited if it does not prove to be a major economic partner to these States.
  • But given the economic slowdown in India today in the wake of COVID-19 and the Ukraine crisis led global slowdown (compared to the much better place that China is in), India’s ability to economically engage with the region remains limited.
  • On the military-strategic side too, India’s performance in the region is less than desirable.
  • Further, it is said that the only way forward for India is a regional strategic alliance with the US.
  • But given the hangover its non-alignment principles and Material constraints India will need fresh mindset to do so.

Conclusion

Thus keeping in mind the sea change in the Indo-Pacific and the shared interests in stabilising the Asian balance of power are objective realities demanding a solid India-US defence partnership.

New Visa Policy of The USA to Restrict Bangladeshis and its Impact on India

Context: The U.S. announced a new visa policy to support Bangladesh’s goal of holding free, fair, and peaceful national elections.

About New Visa Policy

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  • The new visa policy threatens to restrict visas to Bangladeshis who undermine the democratic election process at home. 
  • The restriction would apply to current and former Bangladeshi officials, members of pro-government and opposition political parties, and members of law enforcement, the judiciary, and security services.

Reason for the formulation of the US’s new policy

Because of the authoritarian style of functioning of Bangladesh’s Prime Minister. For example: 

  • Digital Security Act 2018 as a threat to freedom of expression. The space for dissent and criticism has shrunk visibly in Bangladesh
  • Banned the Jamaat-e-Islami as a political party, and set up a court that convicted many of its members for collaborating with the Pakistan Army in 1971 and sentenced several to life terms in prison or death.

Reaction of Bangladesh 

  • Government: US was seeking regime change in Bangladesh and demands such visa policy should not be applied arbitrarily in a non-objective manner.
  • Opposition: They said the policy will play a supporting role in holding the next polls in a fair and credible manner.

Consequences of this policy

  • The U.S. is the largest foreign direct investor in Bangladesh followed by Japan and China.
  • The U.S. is the third largest trading partner of Bangladesh and is the largest recipient of the garments produced in Bangladesh. 
  • A Generalised Scheme of Preferences Plus (GSP+) status with the US and Europe for its readymade garment exports is crucial when Bangladesh graduates out of the least developed country category in 2026. Dhaka is lobbying hard for this.
  • With China taking a keen interest in Bangladesh, the U.S. feels the need to look beyond trade ties. The importance of the Indo-Pacific strategy also makes Bangladesh politically indispensable for the U.S.

Impact on India

  • Over the last few years, the US and India were seen as acting in tandem in Bangladesh, especially as their security objectives converged. The visa policy is a sign that this may be changing. 
  • The post-Afghanistan US, with new priorities, seems more open than India to political change in Dhaka. 
  • The US position on the Bangladesh elections could complicate India’s diplomacy in Bangladesh as India prefers the present government as the Bangladesh Nationalist Party (BNP), links to Islamist parties and is born with anti-India sentiment.

India’s Stand

  • India has not responded to the visa restrictions despite the fact that Bangladesh is the largest trade and security partner of India in South Asia.

Importance of Bangladesh to India:

  • The Prime Minister of Bangladesh has uprooted insurgents of northeast India who had maintained a base in Bangladesh for decades.
  • Signed land transit rights to the North-eastern states,
  • Signed a favourable coal power deal with an Indian company.

Visit of Nepal's PM to India

Context: During Nepal’s PM visit to India, both countries signed series of agreements to strengthen their bilateral relations.

Outcomes of the visit:

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  • A Transit Agreement signed between two countries, which will help Nepal’s population to access India’s inland waterways.
  • A long-term Power Trade Agreement has signed to take forward India – Nepal vision document for cooperation 2022. Under this, target has been set for import of 10,000 MW of electricity from Nepal. 
  • A proposal to build new pipeline from Siliguri to Jhapa in easter Nepal.
  • A MoU is signed for the development of Phukot Karnali Hydroelectric Project.
  • Both countries agreed to achieve the time bound progress on the Pancheshwar multipurpose project.
  • Both Prime Minister’s participated in a ceremony of Gorakhpur – Bhutwal Transmission line.
  • Inauguration of cargo train from Bathnaha in India to Nepal Customs Yard.
  • Two integrated check posts (ICPs) have been inaugurated at Nepalgunj in Nepal and Rupaidhia on India side.
  • Both countries calls for fast track completion of projects related to Ramayana Circuit.

India Nepal Relations background:

India and Nepal share close and friendly relations characterized by age-old historical and cultural linkages, open border and deep-rooted people-to-people contacts. The multifaceted relations between the two countries have been given a renewed momentum in the last few years through intensified high-level political exchanges, regular meetings of bilateral mechanisms across diverse sectors of cooperation, expanding economic and development partnership, boosting connectivity and cooperative initiatives in water resources and hydro-power sectors, defense and security. The India-Nepal Treaty of Peace and Friendship of 1950 forms the bedrock of the special relations that exist between India and Nepal. Nepalese citizens avail facilities and opportunities on par with Indian citizens in accordance with the provisions of the Treaty. Nearly 8 million Nepalese citizens live and work in India. 

Areas of Cooperation:

  1. Defence Cooperation: India and Nepal have a significant defense cooperation, with India assisting the modernization of the Nepal Army through equipment supply and training. Nepal Army personnel attend training courses in Indian Army institutions. The Indian Embassy in Kathmandu facilitates pension disbursement and welfare programs for ex-Gorkha soldiers and their families. They also conduct joint military exercises like Surya Kiran.
  2. Connectivity & Development Partnership: India provides comprehensive development assistance to Nepal, with a focus on grassroots infrastructure, health, water resources, education, and rural development. Additionally, India has extended Lines of Credit worth USD 1.65 billion for infrastructure projects and launched the "India-Nepal New Partnership in Agriculture" for collaborative projects in agricultural research and development.
  3. Water resources Cooperation: Water resources cooperation, particularly regarding shared rivers, is a crucial aspect of India-Nepal relations. Numerous rivers flow from Nepal to India, forming a significant part of the Ganges river basins. These rivers hold the potential for irrigation and power generation. A three-tier bilateral mechanism established in 2008 effectively addresses water resource-related issues, flood management, inundation, and hydropower cooperation between the two countries.
  4. Energy Cooperation: India and Nepal have a Power Exchange Agreement since 1971, utilizing each other's transmission infrastructure for power supply in border areas. Several transmission interconnections enable power exchange and trade. High-capacity cross-border transmission lines and agreements facilitate enhanced electricity transmission and grid connectivity. Additionally, South Asia's first cross-border petroleum products pipeline was inaugurated in 2019, connecting Motihari in India to Amlekhgunj in Nepal.
  5. Economic Cooperation: India is Nepal's largest trading partner, with bilateral trade more than $8.5 billion. Nepal mainly exports petroleum products, vehicles, and agricultural products to India, while importing items such as petroleum, machinery, medicine, and electrical equipment. Indian firms contribute over 30% of Nepal's foreign direct investment and operate in sectors like manufacturing, banking, insurance, power, and tourism. 
  6. Education: India offers approximately 3,000 scholarships each year to Nepalese students for various academic levels and disciplines, both in India and Nepal, including fields like engineering, medicine, agriculture, and fine arts.
  7. Cultural Cooperation: Both countries have signed several agreements and memoranda of understanding (MoUs) in fields such as literature, broadcasting, journalism, fine arts, youth affairs, and twinning of sister cities. Additionally, India is establishing an e-library system in Nepal. The Swami Vivekananda Centre for Indian Culture and the Nepal-Bharat Library are notable institutions promoting Indian culture in Nepal. 

Issues between two India & Nepal:

  1. SLOW PROGRESS ON DEVELOPMENTAL PROJECT:
  • There has been no progress on the 5000 MW Pancheshwar multipurpose project on Mahakali River because of Nepal's reluctance.
  • Progress has also not been witnessed on the dam on Kosi River which would prevent flooding in both India and Nepal because of lack of willingness on the part of Nepal.
  • India announced Rupees 100 crore grant for the development of Janakpur in 2018, but no proposal has been received from the Nepalese side.
  1. BORDER ISSUE:
  • Nepal’s parliament gave approval to second constitutional amendment which gave legal status to the new political map of Nepal and its boundaries with India near the Lipu-Lekh pass.
  • For Nepal, the Kali River originates from Limpiyadhura in the higher Himalayas, giving it access to a triangular-shaped land defined by Limpiyadhura-Lipulekh and Kalapani. (Originating from Treaty of Sugauli, (1814).
  1. TILT TOWARDS CHINA:
  • Nepal shares a border of 1400 km with China in the Tibet region. China is Nepal's second largest trading partner. It has undertaken various projects including the development of airports, hydropower etc.
  • Nepal has been using the China card in its dealing with India under the pretext of balancing its relation between the two big neighbors.
  • With increasing economic influence of China, Nepal does not want to be left out of this success story. It signed a MoU with China on the BRI in 2017.
  • China has also started to intrude in the affairs of Nepal Army by providing training and supply of equipment. This is one of the biggest causes of concern for India because of Indian army's links with the Nepal army.
  • China is leveraging ties with the Maoist parties of Nepal and occasionally using the cheque book diplomacy to increase its influence.

Way Forward

  • Treaty of Peace and Friendship, 1950 should be replaced with a more balanced and democratic treaty.
  • A regulatory regime needs to be introduced by making people produce identity cards while crossing over to either side. 
  • Jointly tackling common challenges in areas of combating terrorism, extremism and all kinds of trafficking.
  • Our engagement with Nepal must find a prominent place for Nepali citizens who are our immediate neighbors. The engagement should not just be limited to the political elites.
  • India needs to appreciate that the people-to-people links between our two countries have an unmatched density and no other country, including China, enjoys this asset.
  • To counter the Chinese influence, India needs to speed up unfinished projects that India has committed and create conditions of mutual trust which makes it difficult for China to leverage any dispute that arises in future.
  • India needs to understand that the Nascent Nepalese democracy will assert independence in its Foreign Policy. But it important for India to create conditions which makes it a go to country for Nepal in times of need.
  • India also needs to work on its perception in the hill population of Nepal.

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. 

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