11th India-China Joint Economic Group: India and China still can’t see eye to eye

By Priya Saraff

The 11th India-China Joint Economic Group on Economic Relations and Trade, Science and Technology took place on 26th March 2018 in New Delhi. The Joint Economic Group (JEG) was established in 1988 when Rajiv Gandhi was the Prime Minister, and the first one took place in September 1989 in New Delhi. The JEG is a dialogue between the Commerce and Industry Minister Suresh Prabhu and his counterpart Zhong Shan. This dialogue was largely anticipated to address the widening trade deficit with China. The data for April-October 2017 shows a deficit of USD 36.73 billion, mainly due to Chinese exports of manufactured products for the telecom and power industries.

The talks

In an interview with The Hindu, Mr Zhong revealed the outcomes of the meeting, the resolution on the trade deficit and the nature of the tie between India and China. He recognised the two as important neighbours, both geared towards development. The two countries resolved to promote each other’s major projects such as China’s Belt and Road Initiative and India’s Make in India and Digital India. With respect to the trade deficit, the Chinese minister noted that India’s exports to China have increased by 40%, easing the imbalance. India’s exports to China will be promoted via the CIIE (China International Import Expo), which Mr Zhong took great care to explain. He also invited India to participate in various sectors of the Chinese economy: agriculture, IT, and manufacturing. The Regional Comprehensive Economic Partnership was also discussed. On being asked about US’s recently announced tariffs, he affirmed China’s openness and belief in globalisation. He encouraged India and China to communicate and coordinate, calling the JEG a “complete success”.

Lack of progress

Mr Zhong’s words were positive but vague, not unlike previous JEG meetings, a Livemint article reveals. Despite the meeting, the countries were unable to make headway because the Chinese side failed to give any concrete plan. As a result, no joint statement was made. Instead, the Indian side issued a statement wherein China was encouraged to open up to Indian imports of agricultural products, IT services, pharmaceutical goods, among others. As always, China promised to address the issue. Even in the last JEG, both countries agreed to work on bridging the trade deficit.

The problem

The $51 billion trade deficit is both a matter of India’s liking for China’s products and China’s string of non-tariff barriers. India mainly imports raw materials to China as against Chinese exports of manufacturing goods to India. Both Indian customers and manufacturers enjoy Chinese cell phones, electronics, and capital goods. China’s barriers come in the form of changes in certification rules, registration processes, specific channels for imports, different calculations of duty, and so on.

The trade deficit has been called “unsustainable”. It is a permanent wedge between a smooth relationship between India and China. While promises have been exchanged in this JEG, history shows that such promises just aren’t enough to bridge the trade deficit and communication gap.

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