CLOSED-OFF BLOCS A NIGHTMARE FOR INDIA
For countries like India, it’s an even greater fear. India’s commerce minister caused a bit of a stir recently when he described ASEAN as “China’s B-team”. That was certainly impolitic. But, perhaps, not entirely unjustified.
New Delhi has been trying to update its free trade agreement with ASEAN for a while. Its particular focus has been to tighten rules-of-origin requirements – the way in which you ensure that a free trade agreement only benefits local producers in both countries, not those shipping goods that originate elsewhere.
Indian officials feel that ASEAN has been going slow on these discussions. Meanwhile, news broke in May that the bloc had expanded the scope of its parallel FTA with China. They achieved that in double-quick time – negotiations only started in November 2022 – which raised a few eyebrows in New Delhi.
Some in India, clearly including its commerce minister, now seem to think that tariff-free trade with Southeast Asia is the same as opening your market to China. That isn’t true – or, at any rate, not yet. But the fact is that member states simply aren’t doing enough to reassure their other trading partners, including India.
It would be a nightmare for most countries, including India, if closed-off blocs were to replace today’s open trading system. Yet Trump’s actions, when combined with China’s overcapacity, are taking us there.
Any country that wants to trade with both sides of the divide – which, clearly, many in Southeast Asia would prefer – will also need to be able to be very transparent about the goods it is exporting, and how much value has been added domestically.
In other words, it’s ASEAN’s move: They will have to step up and give most of their trading partners, not just India and the US, a clearer view into their supply chains.
The US is clearly worried that some countries will evade its tariffs. Those concerns will be shared, especially by India. New Delhi seems to believe that, if world trade blocs form, then ASEAN has already chosen its side – and it won’t be the one India picks. Trade’s impossible without trust, and these two partners will have to work to rebuild it.
