By Anjan Roy
TORONTO: Everyone understands the force of power and more so, China. While China has agreed to lift curbs on exports of one of the most sought out mineral currently, rare earths, to US, it is increasingly throttling similar exports to India.
Trade, economic issues and geo-politics are getting increasingly enmeshed in the evolving diplomatic scenario of the world. It is now becoming increasingly important to fine tune economic policies with geo-political ambitions.
In an announcement of victory, US president and also its commerce secretary had announced on Thursday that China would resume exports of these items to USA. The following day, China announced the same.
US and China have agreed on exports of rare earths, a critical inputs for a variety of scientific work, electronics manufacturing and for defence sector application. The US president Donald Trump had critically said that China would resume exports of rare earths to US.
The kind of coercive actions the two countries were engaged in could be gauged from the fact that last week, US allows ethane traders to load the items on ships meant for China but barred its offloading in China without authorisation from the administration.
The agreement on exports of raw earths and magnets have been the result of protracted negotiations, threats of withdrawal of critical items (including advanced electronic chips) and other inputs on the part of two sides. However, the US administration had virtually wrung the arms of Chinese negotiators with many threats.
One of these was to cancel the visas of Chinese students already enrolled in leading American universities. This single threat had wound China to no end and even the Chinese president Xi Jinping had condemned it. For these families across the country, an admission in a US leading university is the most sought after prize.
If anything, this threat alone had bulldozed the Chinese into a series of concessions to US, including, of course, the across the broad tariffs against Chinese products into USA.
But China has increasingly restricted the exports of the same rare earth materials and magnets to India. As a matter fact, India has been put under severe restrictive measures for a variety of items from rare earths to specialty fertilisers which are likely to crimp on Indian economy on a wide spectrum.
China views India primarily as a market and wants market access without giving inputs for India to develop its own manufacturing base. This has been a continuing war between the two countries and their relations are inherently antagonistic.
Strategically, China views India as a major threat to its aspirations to becoming the dominant power in Asia. China had sought to demonstrate its military power against India during the Galwan incident in 2020.
However, the powerful military reply India gave to its incursions and use of force on the line of actual control had given a set back to that plan. Now China is seeking to reassert its authorities in other ways by imposing strict controls on input supplies for major economic sectors. It has even stalled the exports of tunnel boring machines to India which are essential for many of India’s ambitious infrastructure projects.
It has been reported that the delayed supplies of these machines would inhibit the multi-crore Bombay Ahmedabad highway as well as some of the projects in the high Himalayan mountains for the Border Roads Organisation (BRO). China had raised objections to many of these projects subsequent to the border crises of 2020.
India had also responded to Chinese actions by restricting its investments in the country. All Chinese investments need clearance unlike many other countries. Foreign direct investments by China have dropped following these restrictions.
On the other hand, India has tried its bit of trade diplomacy. India has made some efforts to hit at the Chinese as well. But these are rather feeble, given our dependence on China for a variety of industrial inputs and critical materials.
But there is one element which China also has to reckon with. India is a major importer and its total intake from China is now at $113 billion. Against that Indian exports are at a pitiable $14 billion, leaving a trade deficit in favour of China of as much as $100 billion.
India’s intakes of Chinese products, and the extent of trade deficit, is no short change. USA runs a trade deficit of around $450 billion with China. Even with a much smaller economy, we are contributing a comparatively considerable amount to China’s economic activity. (IPA Service)
