November 8, 2020The Intersection

India should create bubbles of trust with its geopolitical allies

New Delhi will have to focus on four areas: Strengthen geopolitical convergences, increase faith in each other’s judicial systems, deepen economic ties, and boost other countries’ trust in one’s citizens. All four are necessary to create bubbles of trust.

Mint This is from The Intersection column that appears every other Monday in Mint.

A few months ago, this column had argued that the tech war between the United States and China is being fought across a flexible, porous bamboo curtain, and India’s interests lie in staying out of the Sinosphere while creating circles or bubbles of trust with the US, Japan, Taiwan, Australia, Singapore and South Korea that will help Indian companies, professionals and consumers find themselves in circles of opportunity.” Even if political changes around the world rekindle interest in multilateral approaches to world trade, technology and climate change, New Delhi must prioritize deepening relationships with its geopolitical allies (there, I said the word). Like air bubbles for international travel during the pandemic, first create bubbles of trust bilaterally with strategic partners and then explore whether these can coalesce into larger bubbles that include more countries.

New Delhi will have to focus on four areas: Strengthen geopolitical convergences, increase faith in each other’s judicial systems, deepen economic ties, and boost other countries’ trust in one’s citizens. All four are necessary to create bubbles of trust.

China’s rise and Beijing’s hegemonic behaviour has accelerated geopolitical convergences among India, the United States, Australia and Japan. In each of these countries, the dominant political sentiment sees China as a competitor, antagonist or threat. This trend is unlikely to reverse any time soon, even if post-election Washington reaches out to—or is reached out to by—Beijing in an attempt to arrest the growing chasm in their relations. To the extent that the Quad countries, along with Vietnam, Germany, France, and Britain, form a countervailing coalition against China, geopolitics will create opportunities for New Delhi to build on the other three fronts.

Unlike geopolitics where governments are the main actors, it is firms and individuals that determine faith in each others’ judicial systems. Both perceptions and experiences matter. If investors, traders and businesses perceive India’s justice system as biased or unreliable, the negative perception will not only undermine economic decisions, but colour the politics as well. India’s political leaders, policymakers and judges have to do some soul-searching on this account. It is one thing if the judicial system is overloaded and its lower rungs suffer from corruption. It is entirely another if basic matters such as enforcement of even billion-dollar commercial contracts cannot be taken for granted. We should be warned that the goodwill of our geopolitical partners will not endure if their businesses become disgruntled or even uninterested in the Indian economy. As much as New Delhi should insist that Indian companies are treated fairly by regulators and courts in our partner countries, it must ensure that we duly reciprocate.

The geo-economic question is this: To what extent can individual strategic partners, or for example the Quad as a whole, substitute China as a trading partner? This is important not so much to replace China, but to manage dependence on it. China, after all, is the biggest trading partner for most of the Quad countries. Each one of them imports more from China than from the other three put together. It is a better scene in exports, where, other than Australia, which is highly dependent on exports to China, the other three countries export more within the Quad than to China. Indeed, the economic strength of the Quad currently comes from the fact that the United States is the biggest export market for Japan and India. India is the weakest exporter in the Quad and has much work to do in boosting exports to Japan and Australia. As Mukesh Aghi, president of the US-India Strategic Partnership Forum proposed in August, it is a good idea to start working on a preferential trading agreement among the Quad countries.

The trickiest part in forming bubbles of trust is in the movement of people across national boundaries. The relatively open attitude towards immigration that we saw in the 1990s and 2000s has changed. Significant public resentment in the United States and Australia against the fast pace of immigration is understandable, but it remains a fact that liberal immigration policies powered their recent prosperity. An ageing Japan must reconcile with the demographic challenge to its economic well-being. As an exporter of immigrants, India offers its geopolitical partners an opportunity to address their influx dilemmas. Attitudes towards immigrants are coloured by actions of individuals, so it is in India’s interests for its expatriates to be genuinely productive, loyal, law-abiding and assimilated residents of the countries they live in. This is something that Indian immigrants have done well over the past several decades, and newer ones would do well to follow.

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Bubbles are fragile things that need careful handling and thus a suitable metaphor to think about the relationships of trust that India builds with its partners. We are asking countries in the Quad and beyond to trust us with their money, intellectual property, data and the security of their most sensitive computer systems. How well we create and maintain bubbles of trust will determine the extent to which Indian businesses and citizens can exploit opportunities in a world where politics heavily influences economics.

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