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Talking trade with Mekong region

ASEAN-INDIA — Deepening Economic Partnership inMekong Region: Edited by Prabir De; Pub. byResearch and Information System for DevelopingCountries (RIS), Zone IV-B, 4th Floor, India HabitatCentre, Lodi Road, New Delhi-110003, and distributedby Bookwell, 3/79, Nirankari Colony, Delhi-110009.Rs. 750.

ASEAN-INDIA — Deepening Economic Partnership inMekong Region: Edited by Prabir De; Pub. byResearch and Information System for DevelopingCountries (RIS), Zone IV-B, 4th Floor, India HabitatCentre, Lodi Road, New Delhi-110003, and distributedby Bookwell, 3/79, Nirankari Colony, Delhi-110009.Rs. 750.   | Photo Credit: Scanned in chennai DCV

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India has been late in its efforts to reach out to the East despite repeated declarations made from 1993

There is not a single leader from Asia who has not dreamt of “Asian Unity”, “Asian Security” or of an “Asian Economic Community.” Indeed, there was an emotional bond over Asia’s common purpose in the post-war years. In later years, as countries began to grow and pursue different models of trade and development, their paths differed. They also came into conflict with others for various reasons. The Mekong Region offers an interesting area for study.

For long, India remained isolated from Asia, in particular South East Asia, during the years of cold war when she pursued non-alignment policy. ASEAN was looked upon as a progeny of a cold war seeking regional unity, more strategic than economic. It was by 1993 that India changed course and decided to Look East. Its association with ASEAN took several years to fructify and is still evolving. The ASEAN-India Free Trade Agreement (AIFTA) was signed in 2009 after six years of negotiations. The FTA on Services is yet to be signed, not without hiccups.

Despite ASEAN’s rhetoric and posturing, it remains a weak organisation incapable of handling serious challenges, economic or strategic. There has been a proliferation of trade groups carrying many (confusing!) acronyms. There are too many FTAs among members resembling a “spaghetti bowl.” Overall, the record is that ASEAN by itself does not have a vision of Asian economic integration.

The emergence of China in recent decades has altered the Asian scene beyond measure. Much before 2001 when China entered the WTO, its external trade had begun to surge. Its modernisation programmes with the creation of high quality infrastructure, skilled labour at low wages, etc. or the so-called “China Price” attracted foreign direct investment. Foreign conglomerates have built supply chains there. The geography of manufacturing has shifted the pattern of intra-Asian trade. Asian neighbours feed the manufacturing hub that is China.

In the early years of China’s rise, its integration began with East Asia. China moved closer to ASEAN in gradual steps and, in 2002, it signed the “China ASEAN FTA” (CAFTA). By 2012, it enlarged the scope and launched a new negotiation under the rubric Regional Comprehensive Partnership (RCEP) with ASEAN+6 countries. Over time, it has also moved towards East and South Asia. If India was Looking East, China began to Look West.

As many analysts have observed, integrating with Southeast Asia was a key component of China’s multi-pronged regionalism around its borders. Its priority is to integrate the backward regions with the Mekong Region. It tunes its aid and trade policies towards that end. These efforts were greatly facilitated by the Asian Development Bank’s (ADB) Greater Mekong Subregion Program (GMS) launched in 1992. GMS covers Yunnan Province, Cambodia, Laos, Myanmar, Thailand and Vietnam. Later, Guangxi Zhuang region was also included. Kunming became a throbbing growth centre with links to the Mekong region through river, rail, road and other connectivity.

Tardy progress

China’s control over the Mekong River basin has created conflicts and there is uneasy peace. Some analysts feel that China may not have it all on its terms. China wishes to exclude the U.S. from the Asian market. The U.S. has been pursuing its own agenda of Trans-Pacific Partnership (TPP) which aims to exclude China from Asia. India is caught in between and has to balance the two if it is not to be isolated from Asia. Indeed, India has been late in its efforts to reach out to the East despite repeated declarations made from 1993. On date, it is involved in four regional efforts: South Asian Association for Regional Cooperation (SAARC); Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMST-EC); Indian Ocean Rim-Association for Regional Cooperation (IOR-ARC); and Mekong Ganga Cooperation (MGC). The progress on all these fronts has been tardy, if not dismal. The 3,200-km Trilateral Highway Project which is crucial to expand trade with Burma and the rest of ASEAN has been delayed for years due to funding difficulties and, lately, political differences with Burma. Many critics suggest that India should not “Look East” but “Act East.”

The above narration is rather stylised and does not do adequate justice to details. It leaves out security alliances and defence collaborations. The idea is to portray broader economic realities which India has to contend with in the Region. This book covers the issues governing India-Mekong cooperation. It is a compilation of papers submitted in a conference organised by the Research and Information System for Developing Countries (RIS) in June 2011 in collaboration with the Calcutta University.

Lack of connectivity

Most of the papers have not been updated and contain data dating back to 2010. There is an over-reliance on trade patterns and trade flows in the aggregate or comparatively. The y fail to go deeper into the causes inhibiting trade. Some papers deal with specific issues afflicting trade promotion. Perhaps, they are restrained by the main theme of the conference which is “trade.”

Prabir De, the editor, raises a few broader issues in the introductory chapter. He bemoans the lack of connectivity between India, Myanmar and beyond and emphasises the need to build connecting corridors. Unlike the European Union, with nascent Asian economies we have to follow the “hub and spoke” process. With India’s elevated status in ASEAN by 2012, the time is ripe to enter the Mekong Region. Apart from reinforcing India’s security, it will remove economic isolation of the North East Region (NER).

Mia Mikic of UNESCAP captures the daunting tasks faced by developing countries in the wake of the Great Recession. The situation calls for broader economic integration to be pursued at different levels rather than mere trade. The ongoing integration initiatives such as through ASEAN do not go deeper than exchanging trade concessions. Interestingly, the economies of Asia and Pacific have contributed about 50 per cent of all PTAs put into force since 1995. It resulted in more than 125 agreements implemented by 49 countries of the region! And yet, trade has not flourished.

Dibyendi Maiti from Fiji handles the trade relations of China and India with the region. He makes a detailed and comparative econometric study of the trade flows. He notes that, empirically, bilateral trade flow of China has grown at a faster rate than that of India from the early 2000s. As he adds, “It has been observed that both income growth and bilateral trade costs explain the growth of bilateral trade flows respectively with the Mekong Region to a larger extent, but such effects with China are very much stronger and greater than that of India.” His suggestion to India is to improve the quality of economic institutions which would facilitate trade so that effective cost of trade could come down to a level comparable with China.

Amit Batra of the Jawaharlal Nehru University raises important “challenges” faced by India in its trade with the region. He refers to the production networks in Southeast and East Asia and how they have shifted to China as a regional hub. As he says, “Cooperation through integration in manufacturing trade is, however, more difficult in the case of India, which, to begin with, is not an integral part of the Asian production networks.” Therefore, he goes on to suggest, “trade cooperation between India and the Mekong economies is, to a large extent, about delineating clear advantages that India may have so as to navigate the challenges posed by the prior and differential Chinese presence.” The present regional architecture, as it is evolving, suggests the need for Mekong economies to strike out a balance between the two giants.

Apart from a study of broader issues, there are chapters which look into country perspectives: India, Cambodia, Laos, Thailand and Vietnam. From an Indian perspective, Tridib Chakraborti narrates how India has been concentrating its efforts on major (developed) ASEAN economies and neglected its historical links with the Mekong region. He pleads for refreshing the LEP and regaining the “historical space” which China has gained in recent years.

The chapter on Cambodia refers to two important linkages viz. MGC and Initiatives for Asian Integration (IAI) which have remained weak. It pleads for narrowing the developmental gap between the older and newer members of ASEAN.

It is rather difficult to assess the full value of a book drawn on seminar papers. Like the curate’s egg, it is good in parts. Sadly, it is dated and may not be of much value for policymakers whom RIS is expected to assist.

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