Beware the chinaman PDF Print E-mail
Friday, 02 September 2011 00:00
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It is just as well that the prime minister has appointed Anil Ambani as the head of the Indian side of the India-China CEO’s Forum, a body where tricky trade/investment issues get thrashed out at a business-to-business level—in the case of the US, the CEO Forum has been an important factor in relations between the two countries, and hopefully the India-China CEO Forum will do the same. At a time when there is a cry to ‘balance’ the ‘unequal’ trade relations between the two countries—The Indian Express carried a story on Thursday on how various government departments were formulating a plan on this which included raising import duties and using non-tariff barriers—Ambani will inject a dose of much-needed realism. Chinese telecom equipment suppliers are acknowledged to be among the best in the world, a fact that can be ascertained by their rising market shares, and there is little doubt this has played a factor in lowering telecom costs in India. Apart from spending large sums on Chinese telecom imports, Ambani has also lowered his power generation costs by importing Chinese power equipment. Generous loan agreements have accompanied the deals. Any attempt to slow down or raise costs of Chinese exports to India, it has to be kept in mind, will not be without costs—so the government’s plan of action must keep that in mind.

There is little doubt the structure of India’s exports to China is very different from that with the rest of the world. Primary goods comprise 13% of India’s exports to the world but are 56% of India’s exports to China. Similarly, while India exports mainly raw materials to China, it imports mainly manufactured goods. To the extent this is due to non-tariff barriers for India’s manufactured exports, India has to approach the WTO; to the extent there is dumping, India has to prove this and levy anti-dumping duties. But a large part of this surely has to do with the fact that China is a lot more competitive than India in the manufacturing space—the procedures are a lot simpler, the work force is more educated/skilled and China’s intellectual property is far superior to India’s. Only becoming more competitive will take care of this imbalance.

Last Updated ( Sunday, 27 November 2011 16:31 )

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