The economic counterpart of these concerns constitute a second basket. If one considers all the major growth stories since 1945, a common feature was the extraordinary focus that they put on leveraging the global environment. China did that with great effect, initially with the USSR and then with the US and the West. The Asian ‘tiger economies’ practiced it as well, using Japan, the US and now China successively to build themselves. That is how India too approached its various relationships over the last seven decades, but not always with the same single-mindedness. Nevertheless, much of India’s industrialization and capacities in other domains were direct achievements of collaborations enabled by diplomacy. Steel, nuclear industry, higher education and computing are some examples. This held true even more for the post-1991 reform period and the shift eastwards of India’s economic centre of gravity. The interconnection between diplomacy, strategy and economic capabilities is, however, not self-evident. As in security, it is important to distinguish between cause and effect. The economy drives diplomacy; not the other way around. Few would argue that the reforms of the 1990s and greater openness have served us well. But as we then extrapolated it onto free trade agreements with South-East and East Asia, the proposition has become more challengeable. Blame it on structural rigidities, limited competitiveness, inadequate exploitation of opportunities or just plain unfair practices: the growing deficit numbers are a stark reality. More importantly, their negative impact on industry at home is impossible to deny. And China, of course, poses a special trade challenge even without an FTA.
In this background, the recent debate about the RCEP offers lessons in foreign policy as much as in the trade domain. On the one hand, we should not go back to the old dogmas of economic autarky and import substitution. But at the same time, embracing the new dogma of globalization without a cost-benefit analysis is equally dangerous. What we saw in Bangkok recently was a clear-eyed calculation of the gains and costs of entering a new arrangement. We negotiated till the very end, as indeed we should. Then, knowing what was on offer, we took a call. And that call was that no agreement at this time was better than a bad agreement. It is also important to recognize what the RCEP is not. It is not about stepping back from the Act East policy. Even in trade, India already has FTAs with 12 out of the 15 RCEP partners. Nor is there really a connection with our Indo-Pacific approach, as that goes well beyond the RCEP membership. There can be a legitimate debate on the merits of joining RCEP or any other FTA for that matter. Just don’t confuse it for grand strategy.
on November 14 at New Delhi