I have often pondered how China can better win friends and influence people in the world economy. The definition of "hegemony" is often given as the ability and willingness to provide public goods that others cannot. Hegemony, of course, differs from mere preponderance--you can be streets ahead of everyone else, but they won't get with your programme if they perceive you're only looking out for #1. This being me to yet another discussion of China. It seems that its trade practices have had precisely the opposite effect of annoying pretty much everybody else. By re-establishing a peg of 6.83 yuan to the dollar, it has followed America's bedraggled currency unit down and enhanced its export competitiveness in the process--especially against countries which have not heavily "managed" their currencies alike those in the Eurozone. While my post title may be something of an exaggeration, it is only just: China's trade rows with the US are legendary and are well-covered here. Ditto for the European Union, from bra wars to tussles over steel. In its own backyard, China seems to have trouble quelling dissent as Indonesian legislators ponder a time out on trade despite ASEAN having agreed to a pact with China a long, long time ago.Let's now turn our attention to two of the so-called BRICS countries. It's timely since the term has had an anniversary of sorts and there's much stuff on the FT website concerning building BRICS. Supposedly, these countries made a sensible grouping since Brazil had the agricultural products to feed (and power) the world population; India the services for the information age; China the widgets of all shapes and sizes, and Russia the energy and natural resources. Which is not to say that relations among BRICS countries have been entirely smooth. In previous posts, I have mentioned the Bratz wars [1, 2] that have occurred when Indian toymakers successfully persuaded their government to limit toy imports from China on dubious "safety" grounds. However, there's more.
To be short, India naturally fancies itself as an exporter as well. Who doesn't? Alike with many other countries--developed and developing--India is running a rapidly swelling surplus with China that threatens relations. Currency issues aside, many of the PRC's partners perceive the presence of several non-trade barriers (NTBs) that hamper market access, and India is no exception. From this perspective, Bratz wars and other limits placed on Chinese goods are merely tit-for-tat. However, things may be reaching a boiling point in Sino-Indian relations:
India has claimed Wen Jiabao, the Chinese premier, has given his personal commitment to rebalance a booming bilateral trading relationship skewed overwhelmingly in China’s favour by non-tariff barriers. New Delhi asked Beijing to take “corrective steps” to address a growing trade imbalance between the world’s two fastest-growing large economies in high level meetings in the Chinese capital this week.Let Indian soap operas and Bollywood movies enter China. Ditto for generic drugs and agricultural products. It's getting pretty serious when the head of the chamber of commerce there threatens recourse to the WTO. For China, the road to hegemony probably means not taking others to the cleaners so blatantly--especially fellow BRICS and developing countries like India. Giving in a little may go a long way in the Dale Carnegie sweepstakes. Opening the PRC consumer market should help, definitely.
Among the corrective steps recommended by Anand Sharma, India’s commerce minister, was the abolition of restrictions on Indian exports to China of products including information technology, Bollywood films and fresh food. In the first Joint Economic Group meeting between the two countries for four years, China undertook to buy more value-added goods from India, according to the Indian delegation. India’s commerce ministry also said it had extracted a commitment from Mr Wen “that both sides could work together to ensure more balanced trade”.
The concern over the difficulty of exporting to China is one of a number of grievances that have marked a deterioration in relations between New Delhi and Beijing over the past year. Amid the global economic slowdown, India restricted the import of a variety of Chinese products, including toys, chocolates and non-branded mobile phones...
China has recently dislodged the US as India’s largest trading partner. But New Delhi is irked by a rising trade deficit with China that has widened over the past decade to $16bn last year. Indian officials and industrialists are concerned that raw materials are shipped from India to China, whereas trade in the other direction is of manufactured goods that are undercutting India’s small and medium-sized business. China’s exports to India were worth about $29.5bn last year in a total bilateral trade of $43.4bn...
Mr Sharma, during his visit to China, highlighted the need for China to remove restrictions on the import of power equipment, rice and Indian television content. He also complained about time-consuming bureaucratic procedures blocking India’s drugmakers. “The issue of non-tariff barriers is an issue that refers to the World Trade Organisation but it would be mutually favourable to sort this out at the bilateral level,” said Amit Mitra, the general secretary of the Federation of Indian Chambers of Commerce and Industry. “The problem is: how do we get market access?”
[NOTE: I tried to resist doctoring Bratz photos this time but failed again. Trust me, following old guys bicker over trade day in and day out will drive you nuts.]
