Soya sauce or tomato Ketchup? What’s your preference?

By Brian Fernandes

Mangaluru, June 20, 2020: ‘Go chowmein, go.’ Ramdas Athawale’s plan to ban Chinese food draws laughs and criticism on social media – the platform for the generics to turn expert. The main criticism was that it was made in India, by Indian cooks and with Indian ingredients including the Chinese 5 spice blend which is also made in India.

Nonetheless, it went viral just as his previous assault on the coronavirus – ‘Go Corona Go’ did. The Union Minister of State for Social Justice and Empowerment was responding to the Chinese attack on Indian soldiers on the night of June 15 in which at least 20 Indian soldiers died, another 58 were injured but are now reportedly stable. He said Chinese products, including establishments that serve Chinese dishes in India, must be banned.

Social media has a plethora of visuals of Indians breaking and burning their fully functional Chinese appliances such as TVs. The traders association of India has called for a trade boycott of Chinese goods and has listed 500 items in the first phase of their boycott.

The call for an Atmanirbhar Bharat (self-reliant India) which was a wake-up call for all of us makes a lot of sense in the light of all the recent developments and in a strange coincidental way even presupposes them.

However, there is a contradiction. Major TV channels vocal about going local and in their abuse of China and the Chinese are sponsored by Chinese Companies. Chinese companies have huge investments in “Indian” companies and obviously these companies will collapse if their investments are frozen, pulled out, or unusable.

These include companies that enjoyed the benefit of the demonetization drive. Some of these companies in the telecom sector manufacturing in India employ a large number of people, and that is why when social and electronic media are baying for a boycott of their goods and services (including tech and contracting services) the government is rather more cautious.

The cause and effect are having reverberations in the sports world too. The Board of Control for Cricket in India (BCCI) and Indian Olympic Association (IOA) have said that they are ready to terminate their sponsorship deals with Chinese companies if the government asks them to do so and will not use Chinese companies to build their infra in future.

Be that as it may, is turning a border war into a trade war good or bad for India in the short and long-run?

We must understand that trade is an ongoing multilateral affair that has its plusses and minuses. Trade deficits and surplusses are just the balancings of books. Of the top 25 countries with whom India trades, it has a trade surplus with the US, the UK, and the Netherlands. and a trade deficit with other 22, including China.

This list includes France, Germany, Nigeria, South Africa, UAE, Qatar, Russia, South Korea, Japan, Vietnam, Indonesia among others. So we buy more Chinese than they buy Indian. Why – because they are a better and cheaper alternative in the individual judgment of the people who make that decision – and there are many of them.

Of course, when you buy more of another’s goods, you must have the foreign exchange reserves to do so. And we have – more than US$500 billion. Also, we must understand our lacunae – that we have a huge market but our goods and services are not competitive enough for a variety of reasons. So its trade and a trade-off…So to ban Chinese goods would mean, creating an exploitative monopoly and that is already happening with sanitizers and masks.

Now, what does that do? It mostly will make things costlier, rarer, and create an artificial demand which will fuel profiteering. Can the poor afford it? Doubtful. So they will go without it. A noble cause, ignoble method because they are the hardest hit always in everything – the recent lockdown is a prime example. The middle-class and the rich got away easily, but the poor got stuck.

Then there are the retailers – they have paid for the goods and will not be able to sell them? Who will compensate them in an already bleak economic scenario? The Government has to contemplate, it must be doing that seeing how they are encouraging individual boycotts through social media rather than put in place a blanket ban!

Who consumes Chinese goods and services? is it only the end consumer? No. There are manufacturers (raw materials, Skd’s), governments (infrastructure services), and exporters who assemble brand and export goods. It’s a multitude of people using efficiency and effectiveness of Chinese imports to further their business and in turn help the government generate revenue.

True because of these imports, Indian innovation is limited, but it will take years for India to match the cost-effectiveness of Chinese goods and services.

Will a trade ban or ban on Chinese goods and services or a boycott hurt China? It will, but barely. It may hurt India more. China accounts for 5 percent of India’s exports and 14 percent of India’s imports — in US$ value terms — India’s imports from China (that is, China’s exports) are just 3 percent of China’s total exports. More importantly, China’s imports from India are less than 1 percent of its total imports. Self Explanatory. China is everywhere and one country pushing them out will barely dent their confidence, while it may help us swell our chests. In the short term, we will have to look for foreign alternatives to Chinese goods and that’s not easy to do.

There’s been outrage in the media regarding Infra contracts being awarded to Chinese firms by government agencies. Suggestions have been made to preclude them from tendering and to renege on awarded tenders citing national security. Definitely logical and permissible in times of war. But have things descended to that level? The Government doesn’t seem to think so. They are in intense negotiations with the Chinese side at the military level to sort things out. The brutality of the attack cannot and must not be forgotten, but reneging may hurt India’s credibility and the government is wary of the same. One result of such actions will be that Foreign Direct Investment will come at a higher cost.

One way of handling this mess diplomatically is to raise tariffs – Just as the US is doing to the rest of the world and to both China and India. It will make Indians look for more efficient alternatives naturally and it may well find it has taken a first middling step toward becoming Atmanribhar. But total self-reliance is a myth that can be visualized but not attained, and reciprocation is only a step away. Besides, there are international obligations under the WTO that India has to think about.

The government will have to keep all these factors in mind while making a decision to ban China from India or even raise its trade fences. But individuals and bodies of individuals have no such compunctions and that is why they are being urged to sacrifice their wallet for the nation and most are willing to do it voluntarily.

(Brian Fernandes, is CEO and Director, Spearhead Media Pvt. Ltd owners and publishers of the popular media brands www.newskarnataka.com, www.newskannada.com and Karnataka Today.)