Wednesday, June 26, 2019

India to Gain More from Working with China Than US
By Hu Weijia
Global Times
2019/6/26 21:53:40

US Secretary of State Mike Pompeo said in India Wednesday the US-India partnership "is already beginning to reach new heights," but the bilateral relationship is less rosy than it appears. There may be some progress in bilateral talks, but both sides are unlikely to compromise when it comes to core interests such as trade conflicts.

It seems more differences have emerged between India and the US, such as the Iran issue and trade. India's ambition to become a manufacturing powerhouse has increased its exports to the US, which is busy reducing its ballooning trade deficit. There have been frequent trade disputes between the two countries in recent times.

Just ahead of Pompeo's visit, India raised tariffs on 28 items imported from the US in retaliation for Washington's earlier withdrawal of trade privileges.

The India-US relationship is at a crossroads, and China is a key factor in the equation. India has long been seen as counterweight to China's rise in the region. This may explain why Washington is enthusiastic about the Indo-Pacific strategy, which reflects the attention of the US to the Indian Ocean region. If India takes the China factor into account and properly handles the issue, it may gain the initiative in its relations with the US and be able to seek more benefits.

Foreign direct investment (FDI) is a major source of funding for India's economic development in India. The flows of capital from China and the US have remained robust in recent years. US-based investors have focused on the internet and high technology, while Chinese companies have focused on manufacturing in such areas as the smartphone sector.

The escalating trade war between the US and China offers an opportunity for India to attract large multinationals looking to relocate production. At this critical moment, only a policy of nonalignment can help India attract more FDI from both China and the US by striking a balance between the two countries.

If India gets too close to China, its economic problems with the US may escalate at any time and worsen the strained bilateral relationship with Washington. However, if New Delhi relies on Washington to counter China's influence in the Indian Ocean region, India will miss growth opportunities brought by the Chinese economy. So the Indo-Pacific strategy, which reflects a US effort to counter China's rise, is not a good choice for India to pursue its economic growth.

Pompeo's visit to India will be fruitful only if he can offer a package of incentives that exceeds the benefits of China-Indian economic cooperation, but that's unlikely. Whether India is able to gain benefits amid the trade war depends on whether it can further open up its economy to make itself an attractive destination for FDI, rather than the Indo-Pacific strategy.

The author is a reporter with the Global Times.

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