China offer on free-trade talks with India
By James Lamont in New Delhi and Kathrin Hille in Beijing
Published: April 2 2010 15:49 | Last updated: April 2 2010 16:58
China has offered to accelerate free trade agreement talks with India in a bid to balance a burgeoning trade relationship between two of Asia’s largest economies that is heavily skewed in Beijing’s favour.
Chinese officials expect trade between the two to rise to $60bn (€44.5bn, £39.5bn) this year, as the world’s two fast-growing large economies recover from the global financial crisis. Yet Indian officials describe a trade deficit that last year was about $16bn in Beijing’s favour as “politically unsustainable”, and identify it as a point of friction in a relationship key to Asia’s peace and stability.
Zhang Yan, Beijing’s ambassador to New Delhi, told the Financial Times China was preparing the ground for a bilateral trade deal with India “similar to a free trade agreement”.
“The two countries should endeavour to reach a regional trade arrangement and take effective measures to remove trade and investment barriers,” said Mr Zhang.
He said steps were needed to “improve the trade configuration” and remedy the trade imbalance across the Himalayas.
Trade between the two countries has been growing at more than 30 per cent in recent years. However, about 70 per cent of India’s exports to China are raw materials that then come back as higher value finished goods that undercut India’s small and medium-sized businesses.
India has appealed for China to open up its market to Indian goods and companies, complaining that they face considerable non-tariff barriers and seldom win state contracts. Among other measures, New Delhi wants Beijing to end restrictions on Indian exports of information technology, Bollywood films and fresh food. It also wants greater opportunities in sectors such as pharmaceuticals and energy.
Vishnu Prakash, a senior government spokesman on foreign affairs, confirmed talks over a bilateral agreement were under way. “We have been discussing a Regional Trading Agreement on the lines of an FTA with China,” he said.
India has FTAs with South Korea and the Association of South East Asian Nations, and is currently locked in negotiations with the European Union. China, meanwhile, has signed bilateral agreements with Asean, Pakistan, Chile, New Zealand, Singapore and Peru
The offer to liberalise trade between India and its largest trading partner in terms of goods comes on the eve of an official visit by SM Krishna, India’s foreign minister, to Beijing and before an expected visit by President Pratibha Patil later this year.
Shivshankar Menon, India’s national security adviser, said both countries should seize the opportunities for co-operation that the domestic transformation of their local economies were presenting, while carefully managing a border dispute in Arunachal Pradesh, a state in India’s north-east.
But he warned that “nativist voices” in both countries which stress rivalry over partnership threatened to disrupt a relationship key to holding the peace in a “complicated regional security environment in Asia”.
“Asia has proved she can do the economics. Can she also do the politics that come with power?” Mr Menon asked in an address to the Indian Council of World Affairs in Delhi.
“When the world is changing so rapidly, and when uncertainty in the international system is at unprecedented levels, neither India nor China can afford misperceptions or distortions of policy caused by a lack of understanding of each other’s compulsions and policy processes.”