Introduction:
At present scenario due to the novel coronavirus (COVID-19) has caused a lot of crisis in every field of life, it has brought a change in personal behaviour and also the norms of the society. COVID-19 has taken a toll on the life of the people resulting in a large number of deaths. In this global health crisis, trade is very important to save lives and also there should be international co-operation to keep the flow of trade. In this uncertain period of life where everywhere there is coronavirus, we can do the following things to keep the flow of trade :
- To keep the flow of essential items like heath supplies and food.
- By improving transparency about trade-related policy actions and intentions. We can boost confidence in trade.
- To avoid making things worst by unnecessary restrictions on export at things and other trade barriers.
USA – China Relationship
At this situation of pandemic instead of trying to collectively deal with this severe situation, the rivalry between the two largest economies of the world (the USA and China) has hit the headlines of international news. The rivalry first started with trade war before the advent of COVID-19 and later on, the rivalry began with the blame game of the origin of COVID-19. While everyone was busy looking at the cases of the COVID-19 increasing day by day in the world, in international trade another event started taking place from July 2018 which started becoming worse and worse that is US-China trade war. President Donald Trump vowed to prevent the US from being exploited by other countries, mainly China, which had benefited from the US market by running Bilateral trade surpluses.
It is quite unexpected that the US has a socio-economic structural framework which is based on Democratic Capitalism and it is dependent on Communist Socio-Political Economic structured nation, China. China has risen up a lot and it is being acknowledged by World Community as a manufacturing heavyweight (2001 WTO Accession) and it is posing a very big challenge to the US in nearly all the sectors except the military. In order to expand Capitalist network and to achieve prosperity, US entrepreneurs move their manufacturing base to the countries like China, Brazil, Mexico, etc where the labour is cheap and the market is more stable. China’s market thrived with cheap and low skilled labour, the competition of innovation was also very less. So, the US brought Chinese into international trading with a tripartite objective. This resulted in a large increase in the economy of China and it brought a change in the political system of China towards democracy.
During this period there was a lot of trade tensions and it affected the decisions of the investment and impacted supply chains including countries supplying raw materials and intermediates to China for final processing and export to the US. The US has the highest death toll of any country from coronavirus pandemic which has hit badly its economy and also the economy of the world. Mr Trump has said that he had evidence that a laboratory in China was the main source of the outbreak of COVID-19 but he did not further share any more specific or intense details. The pandemic has wiped out all the job gains in the US, more than 26 million Americans have filed for unemployment benefits.
USA’s socio-economic prosperity is dependent on to some extent on Chinese thriving manufacturing base. This can be seen as evidence from the fact of bilateral trade between USA and China in 2019 which was almost 560 billion US dollars. Out of 560 billion US dollars, the export of Chinese to the US was 452 billion US dollars and US export was 106 billion dollars. The origin of a trade war started with election Campaign of US President, Ronald Trump. During his election campaign, he claimed to reduce more than 350 billion US dollar trade deficit when elected to power. On the pretext of Chinese unfair trade practices such like forced technology transfer, lack of market access to American companies in China, intellectual property theft and unlevel playing field caused by Chinese subsidies to select domestic companies. Mainly on transport and electronic goods import from China, the USA imposed 25% tariff on 50 billion US dollars. This made China also to impose a retaliatory tariff on imports from the USA mainly on beef, dairy products and agriculture. In January 2020 trade deal between China and the US was materialized. All this was taking place in midst of global market unrest which was charged events such as unilateral withdrawal of US from JCPOA, the downfall of the prices of crude oil after bombing of Saudi Armaco oil processing facility at Abqaiq and Khurais, a standoff between the United States and Turkey. The global economy and the flow of all these events came to a standstill with the advent of coronavirus (COVID-19) at present the major show is taken by COVID-19. Almost a century back after the first world war, there was a trade war with tit-for-tat tariff which resulted in The Great Economic Depression of 1929.
Benefits of India due to COVID-19
The trade war has a direct impact on US companies which were having an industrial-based position in China to produce almost 25% of Global manufacturing goods. The investors are forced to diversify the sources of manufacturing due to COVID-19. As per the US, India Strategic and Partnership Forum (USISPF), nearly 200 companies are wanting to move their base of manufacturing from China to India. Currently, South-East Asian countries are considered to be more favourable than India but there are few sectors in which India can really accelerate the economic and diplomatic offences. The third-largest market in pharmaceutical is the Indian pharmaceutical industry. It manufactures nearly 60% of the global vaccine requirement. The entire globe has turned in its market at this phase of COVID-19. If met with certain firm reforms, logistical and infrastructural requirements, all the manufacturing industries which require intensive labours like the textile industry, assembling industry, electronic industry, etc. can bring a substantial portion of global exports in India which is at present 1.63% of global trade. The manufacturers like Apple’s iPhone, Foxconn have already decided to shift 20% of the production from China to India. the Indian Economy can be benefitted by almost 11 billion US dollars by these trade shifts as it is being estimated by the United Nations Conference on Trade and Development. Japan has kept aside 2.2 billion US dollars for its firms to shift their base of manufacturing from China after the disruption of the chain of supply due to coronavirus. For foreign countries to have a manufacturing base in India they have to overcome 2 very big hurdles that are, landlords and labour regulations. Due to lack of coordination interstate issues with landlords and with more than 40 labour laws which have to be strictly adhered to made investors very uncomfortable. Recently the Indian Government has brought all these labour laws under four labour courts. The pharmaceutical industries of India depend upon the Chinese import of APIs (active pharmaceutical ingredients). There are also environmental concerns to avoid cases like Bhopal Tragedy, 1984; LG Polymer Styrene Gas Leak 2020 at Vishakhapatnam.
Measures to be taken for Economic Growth of India
At present both the USA and China are both global competitors and are competing with each other at equal footings. We are at present in the transitional phase of the global system. In this transitional phase the events like COVID-19, trade wars etc. is to some extent causing benefit to India. the opportunities are knocking at our doors. If the following measures are been taken then India’s economic growth will tremendously increase. The steps which India must take are :
- Comprehensive structural framework by overall review of the domestic business environment with a consultation with relevant stakeholders including economists, corporate, trade unions, legal fraternity, environmentalists.
- An extensive and swift diplomatic offence in negotiating terms with the major industrial powers like South Korea, Israel, Japan, etc. to invest in India.
The decision on RCEP should be reconsidered and renegotiated with the aim of building a base for manufacturing in the country without compromising with the interest of the Agricultural sector.
Conclusion
During COVID-19 pandemic the hardest hit people and women young people and workers having low income according to the new OECD report. In a report of United Nations High-Level Political Forum (HLPF) which took place from July 7 – July 16, 2020; World Trade Organization Secretariat highlights that trade, fiscal and monetary policies are very important to support the global sustainable development and achieving the UN Sustainable Development Goals (SDGs). Amid the crisis of COVID-19, keeping trade open and posturing favourable business environment will be critical to spur the renewed investment needed to meet the SDGs.
On July 9, 2020, a joint statement was issued by the WTO, International Chamber of Commerce (ICC) and B20 Saudi Arabia pointed out the diminishing availability of trade finance. They want that the gaps between the trade finance supply and demand will seriously imply the ability of trade to support post-COVID-19 economic recovery, they are also urging the public and private sectors to work hard together to overcome the shortage.
The 21st century is considered to be the Asian century. This is linked with the growth of India. The world was Europeanized, Americanized in the 20th century and in the 21st century it is Asianization. At this time the trade bar is the last thing for the global economy and markets. If the two giants continue to go ahead with tariffs or other economic sanctions. It will ruin the stalk market.
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