On 11th September 2020, Takshashila Institution hosted the third #DeepWebinar in the China Challenge Series in partnership with Hudson Institute. The session focused on exploring the prospect of an economic decoupling from China and included Narayan Ramachandran, Co-Founder of The Takshashila Institution and Thomas J. Duesterberg, Senior Fellow at The Hudson Institute as panelists. Anupam Manur, Assistant Professor, Takshashila Institution, anchored the discussion as the host. Remya Nair (Senior Associate Editor at The Print), Devika Kher ( MPP candidate at Harris School of Public Policy) and Antra Ghosal Singh(Research Associate at Delhi Policy Group) joined the #DeepWebinar as discussants, posing thoughtful questions and providing insightful comments.
The conversation began with deliberation on the state of supply chains and world trade in a post pandemic world.
First of the panellists to speak Thomas J. Duesterberg stated that there has been contestation against the fairly free and open trade system that prevailed since WWII in the last few decades and contributing factors to it seem to be job losses in Europe and US. China’s rise and its mercantilist approach to world trade has just exasperated the problem while the COVID19 pandemic makes it far worse by disrupting supply chains. All of these factors have contributed to the tendency of states to look more inward. He also said that despite the rhetoric of senior Trump administration officials, the US has not given up on globalisation. Looking ahead, he said that the US is going to make an effort to seek allies and counter increasing Chinese dominance.
In reply to a question by the host Thomas Duesterberg then talked about the possibility of global supply chains shifting out of China. He believes that while there has been a tendency towards it but it is difficult to do since supply chains and manufacturing facilities are a big investment that is very difficult to setup much less move. He said that nothing is going to happen very fast but there is going to be a gradual movement away from China.
The second panellist Narayan Ramachandran then stated that going forward the future will be informed by the past and the demonstrated success of the multilateral rules based system. He said that there are three big issues facing the world today: nuclear deterrence, globalisation and climate change, plans for addressing which and a new multilateral order will have to be discovered. He further said that China has utilised the WTO very successfully, and in some senses has abused and overused its privilege at the WTO, which is why we are seeing a backlash now.
In reply to a question by the host Thomas Duesterberg said that a lot would depend on how much cooperation we can get from China and it also depends on how far we go decoupling from China on trade. He said that The US and UK are critical of the technocratic judicialisation of WTO , and want more democratic oversight instead of leaving everything to bureaucrats.
Narayan Ramachandran further agreed that The WTO needs to be reformed and that there should be space for political negotiations in the reform section.He also asserted that trade works best when reciprocal and fair.
The host then posed a question about if India should bat for a global rules-based trade order, particularly working with the US ,In response to which Narayan Ramachandran said that yes India should work with all nations willing to work with it, to reform the WTO, and that it’s India’s moment to benefit the greatest. Both Panelists agreed that the answer was not to do away with the WTO but to reform it.
The first discussant Remiya Nair then inquired from the panelists if they believe The Indian government’s call for self-reliance would entail producing goods that India does not excel at producing? Narayan Ramachandran responded saying that self-reliance at this moment is a completely meaningless slogan from India’s economic perspective and that bilateral demonising doesn’t help India.Thomas Duesterberg echoed Narayan Ramachandran that total self-reliance would be detrimental and not beneficial to India’s interests.
The second discussant Devika Kher then inquired about the panelists’s views on how India can leverage its consumption to attract global firms? To which Narayan Ramachandran said that India’s market is attractive, but there has to be a comprehensive package including non-arbitrary use of law, taxation & low-probability of regulation changing with greater intensity in order for India to be an attractive prospect for global firms.Thomas Duesterberg responded with his belief that If india moves forward with a decent sized growth then new markets being looked for by EU/US firms in the process of partial/slow decoupling from china will include India.
The third and final discussant Antra Ghosal Singh then inquired about the seemingly fast pace of China’s internal reforms in the light of recent trends of anti-globalisation narratives to which Thomas Duesterberg responded by saying conditions in China are deteriorating for foreign producers. US businesses are increasingly weary of producing in China because they see the intellectual content of their processes and patents being eroded. China is increasingly dependent on foreign capital, and critics of China are increasingly looking at access to global financial markets, which still are dominated by the US and Europe who are thinking about denying China access for geopolitical reasons.
The conversation was then concluded with the panellists addressing audience questions which talked about the Indian unorganised sector and in response to it Narayan Ramachandaran said that dispensing with labour law is not reform and will be struck down by the due process but there is reform on the horizon in the form of legislation and in India laws are not the problem, like all developing countries difference between defacto and dejure laws is the problem, the defacto implementation of the law is the silent killer in the pandemic.
Another audience question asked that if geopolitics was trumping economic considerations in the world, what kind of policies will the World Bank and IMF come out with and will they endorse openness? Will there be a change of tone for them? To which Thomas Duesterberg replied that the world bank and IMF are very even handed organisations and they aren’t dominated by an EU-US axis but are instead comprised of a broad coalition of countries. They are Political in nature but not dominated by the west. In times like these less economic efficiency is easier to bear if reward outweighs the cost for people.
About the Takshashila Institution
The Takshashila Institution is an independent center for research and education in public policy. It is a non-partisan, non-profit organization that advocates the values of freedom, openness, tolerance, pluralism and responsible citizenship.
The Takshashila Institution seeks to transform India through better public policies, bridging the governance gap by developing better public servants, civil society leaders, professionals and informed citizens.
About Hudson Institute
Founded in 1961 by strategist Herman Kahn, Hudson Institute challenges conventional thinking and helps manage strategic transitions to the future through interdisciplinary studies in defense, international relations, economics, health care, technology, culture, and law.
Hudson guides public policymakers and global leaders in government and business through a vigorous program of publications, conferences, policy briefings, and recommendations.
The video of the #DeepWebinar can be assessed on Takshashila Institution’s Youtube Channel.