Geopolitics

How U.S-China Trade War Could Be A Chance For India To Cash In

Trump's trade war with China could be a golden opportunity for India. But first, it'll need to revisit its trade policies and regulatory framework.

Workers at a car factory in Chennai, India
Workers at a car factory in Chennai, India
Pradeep S Mehta and Surendar Singh

-Analysis-

NEW DELHI — The U.S.-China trade war is disrupting the functioning of global value chains (GVCs) that spread across East Asia, North America and West Europe, and represent nearly two-thirds of all international trade. Its potential spillover effects will likely transform the geography of GVCs, which in turn define the global trading system's geo-economic architecture.

This is forcing a large number of Asian manufacturers to shift their production lines from East Asia to low-cost economies such as Bangladesh, Cambodia and Sri Lanka, which are relatively less fragile to a global trade war. Indeed, many multinational corporations including Mitsubishi Electric, Hasbro, Micron Technology and Toshiba Machine are contemplating shifting their production centers to minimize the impact of the trade war between the United States and China.

All of this begs the question of whether the trade war offers a window of opportunity for India. The answer is probably yes. This is a unique opportunity for India to increase its exports and to capture greater space in GVCs. But the potential gains from this opportunity hinge on India's ability to align its trade, investment and infrastructure with operative principles of GVCs.

The ripple effects of this cannot be overstated.

That, in turn, raises an even bigger question: Do India's policies provide incentives for Asian manufacturers to relocate in India?

It's clear that our trade and trade-related policy-makers need to undertake specific and substantial structural reforms over the next three to five years. If this is done, we can definitely emerge as the next factory of the world. The ripple effects of this cannot be overstated — it will emerge as a sustained contributor towards creating new job opportunities for our youth.

If we fail, India will have to deal with social unrest due to high unemployment of the increasing demographic dividend.

Recipe for success

So, what needs to be done?

First, India has yet to liberalize its trade policy to make it coherent with the value chain led trade. India's average applied tariff is higher than those in most other East Asia and Pacific economies. In 2016, India's trade-weighted average tariff was 7.5%, while in East Asia & Pacific economies, it was 3.6%. Higher tariffs hindering the imports of intermediate products create an impact at the very root of value addition through forward linkages.

Even with this disparity and its concomitant impact on the ability of Indian firms to operate within GVCs, the fact of the matter is India has recently increased its import duty on a number of products including telecom equipment, steel, automobile, textile products. An increase in import tariffs generates trade policy uncertainty. Moreover, such changes in tariffs may drive India out of regional production networks, which operate on efficient movement of intermediate products across borders.

Metal worker in Allahabad, India — Photo: Prabhat Kumar Verma/ZUMA

Other than this, India's trade policy is largely conducted at the aggregate level and its overall orientation is on conventional product or sector-specific policies. Such policies often fail to capture nuances of comparative cost advantage at firm level that are vital for the participation in GVC-led trade. This is primarily happening due to the absence of trade-related firm-level data to understand the critical factors of their internationalization.

Second, free trade agreements are important instruments to facilitate regional integration and connect with regional and global value chains. In the Asia-Pacific region, India has comprehensive free trade agreements with Japan, South Korea, Association of Southeast Asian Nations (ASEAN), Singapore and Malaysia. But Indian firms are largely unable to use these FTAs to penetrate themselves into foreign markets. One of the major reasons is low utilization of these FTAs.

This is evident from a survey by Japan External Trade Organization (JETRO) in 2017. The utilization rate of India's FTAs with ASEAN and Japan is higher on imports than exports. The average utilization rate for exports is 42% for ASEAN and Japan, while on imports it is 71% and 55% respectively. The higher usage of FTAs on imports indicates that Indian importers are making greater use of these FTAs and, therefore, greater market access for ASEAN and Japanese products in the Indian market.

The lower usage of FTAs in case of exports indicates that India's FTAs do not provide incentives to importers in Japan and ASEAN to import under these FTAs. One of the reasons is wafer-thin margins between MFN (most-favored-nation) tariffs that are the same for all WTO (World Trade Organisation) members and preferential tariffs under these FTAs.

Third, participation in GVCs also hinges on the state of trade infrastructure and trade regulatory framework. Efficient export and import clearance is vital for well-lubricated value chains. India's performance on the World Bank's Trading Across Borders, 2018 has improved remarkably by taking a quantum leap from 146 to 80 out of 190 countries. Thus, it would be interesting to see how it impacts the cost and time of doing trade and facilitate the integration of Indian firms in GVCs.

Global benchmarks

However, it would be worthwhile if one analyzes the current performance of India on trade facilitation in the context of the nature of traded products. Cotton, diamonds, rice, yarn, garments, gem and jewelry, low-end engineering products, pharmaceuticals and petrochemicals make up the bulk of the India's exports. These products can be easily exported with less efficient trade infrastructure. Furthermore, more than 70% of India's global trade takes place through Nhava Sheva Mumbai, Chennai and Mundra ports.

All of them are overburdened and working at 85% of their capacity whereas globally, 70% is considered to be ideal. Therefore, reforms at the broader level might help India improve its ranking on different global benchmarks. But it's difficult to say that they would produce positive impact on business operations, where they are actually needed.

On the trade policy front, Indian policymakers should move away from a sector-specific approach to GVC-oriented policies, which measure success in terms of efficiency and reduced transaction costs. There is also an urgent need to enhance the robustness of "trade policy analysis' with a particular focus on firm level analysis. For this, special attention should be made to collect firm level trade-related data to enhance the effectiveness of trade policy.

Another necessary step is to conduct a deeper examination of the impact of trade agreements on India's firms and their integration into global value chains. A simple trade flows analysis will not lead to any substantive results.

On the trade facilitation front, India should think about the setting-up of National Trade Platform (NTP) along the lines of Singapore's NTP. This will serve as a one-stop platform for all kinds of trade information and will electronically facilitate export-import related compliances. The NTP will help our exporters and importers submit all information/documents online at one place and there will be no need to deal with customs, other regulatory bodies, banks and port authorities separately.

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food / travel

The True Horrors Behind 7 Haunted Locations Around The World

With Halloween arriving, we have dug up the would-be ghosts of documented evil and bloodshed from the past.

Inside Poveglia Island's abandoned asylum

Laure Gautherin and Carl-Johan Karlsson

When Hallows Eve was first introduced as a Celtic festival some 2,000 years ago, bonfires and costumes were seen as a legitimate way to ward off ghosts and evil spirits. Today of course, with science and logic being real ghostbusters, spine-chilling tales of haunted forests, abandoned asylums and deserted graveyards have rather become a way to add some mystery and suspense to our lives.

And yet there are still spooky places around the world that have something more than legend attached to them. From Spain to Uzbekistan and Australia, these locations prove that haunting lore is sometimes rooted in very real, and often terrible events.

Shahr-e Gholghola, City of Screams - Afghanistan

photo of  ruins of Shahr-e Gholghola,

The ruins of Shahr-e Gholghola, the City of Screams, in Afghanistan

Dai He/Xinhua via ZUMA Wire


According to locals, ghosts from this ancient royal citadel located in the Valley of Bamyan, 150 miles northwest of Kabul, have been screaming for 800 years. You can hear them from miles away, at twilight, when they relive their massacre.

In the spring 1221, the fortress built by Buddhist Ghorids in the 6th century became the theater of the final battle between Jalal ad-Din Mingburnu, last ruler of the Khwarezmian Empire, and the Mongol Horde led by Genghis Khan. It is said that Khan's beloved grandson, Mutakhan, had been killed on his mission to sack Bamyan. To avenge him, the Mongol leader went himself and ordered to kill every living creature in the city, children included.

The ruins today bear the name of Shahr-e Gholghola, meaning City of Screams or City of Sorrows. The archeological site, rich in Afghan history, is open to the public and though its remaining walls stay quiet during the day, locals say that the night brings the echoes of fear and agony. Others claim the place comes back to life eight centuries ago, and one can hear the bustle of the city and people calling each other.

Gettysburg, Civil War battlefield - U.S.

photo of rocks and trees in Gettysburg

View of the battlefields from Little Round Top, Gettysburg, PA, USA

Unsplash/@nemo23


Even ghosts non-believers agree there is something eerie about Gettysbury. The city in the state of Pennsylvania is now one of the most popular destinations in the U.S. for spirits and paranormal activities sight-seeing; and many visitors report they witness exactly what they came for: sounds of drums and gunshots, spooky encounters and camera malfunctions in one specific spot… just to name a few!

The Battle of Gettysburg, for which President Abraham Lincoln wrote his best known public address, is considered a turning point in the Civil War that led to the Union's victory. It lasted three days, from July 1st to July 3rd, 1863, but it accounts for the worst casualties of the entire conflict, with 23,000 on the Union side (3,100 men killed) and 28,000 for the Confederates (including 3,900 deaths). Thousands of soldiers were buried on the battlefield in mass graves - without proper rites, legend says - before being relocated to the National Military Park Cemetery for the Unionists.

Since then, legend has it, their restless souls wander, unaware the war has ended. You can find them everywhere, on the battlefield or in the town's preserved Inns and hotels turned into field hospitals back then.

Belchite, Civil War massacre - Spain

photo of sunset of old Belchite

Old Belchite, Spain

Belchite Town Council


Shy lost souls wandering and briefly appearing in front of visitors, unexplainable forces attracting some to specific places of the town, recorded noises of planes, gunshots and bombs, like forever echoes of a drama which left an open wound in Spanish history…

That wound, still unhealed, is the Spanish Civil War; and at its height in 1937, Belchite village, located in the Zaragoza Province in the northeast of Spain, represented a strategic objective of the Republican forces to take over the nearby capital city of Zaragoza.

Instead of being a simple step in their operation, it became the field of an intense battle opposing the loyalist army and that of General Francisco Franco's. Between August 24 and September 6, more than 5,000 people were killed, including half of Belchite's population. The town was left in rubble. As a way to illustrate the Republicans' violence, Franco decided to leave the old town in ruins and build a new Belchite nearby. All the survivors were relocated there, but they had to wait 15 years for it to be complete.

If nothing particular happens in new Belchite, home to around 1,500 residents, the remains of old Belchite offer their share of chilling ghost stories. Some visitors say they felt a presence, someone watching them, sudden change of temperatures and strange sounds. The ruins of the old village have been used as a film set for Terry Gilliam's The Adventures of Baron Munchausen - with the crew reporting the apparition of two women dressed in period costumes - and Guillermo del Toro's Pan's Labyrinth. And in October 1986, members of the television program "Cuarta Dimensión" (the 4th dimension) spent a night in Belchite and came back with some spooky recordings of war sounds.

Gur Emir, a conquerer’s mausoleum - Uzbekistan

photo of Gur Emir (Tomb of Timur) i

Gur Emir (Tomb of Timur) in Samarkand, Uzbekistan

Chris Bradley/Design Pics via ZUMA Wire


The news echoed through the streets and bazaars of Samarkand: "The Russian expedition will open the tomb of Tamerlane the Great. It will be our curse!" It was June 1941, and a small team of Soviet researchers began excavations in the Gur-Emir mausoleum in southeastern Uzbekistan.

The aim was to prove that the remains in the tomb did in fact belong to Tamerlane — the infamous 14th-century conqueror and first ruler of the Timurid dynasty who some historians say massacred 1% of the world's population in 1360.

Still, on June 20, despite protests from local residents and Muslim clergy, Tamerlame's tomb was cracked open — marked with the inscription: "When I Rise From the Dead, The World Shall Tremble."

Only two days later, Nazi Germany invaded the Soviet Union, with the people of Samarkand linking it to the disturbing of Tamerlane's peace. Amid local protests, the excavation was immediately wrapped up and the remains of the Turkish/Mongol conqueror were sent to Moscow. The turning point in the war came with the victory in the Battle of Stalingrad — only a month after a superstitious Stalin ordered the return of Tamerlane's remains to Samarkand where the former emperor was re-buried with full honors.

Gamla Stan, a royal massacre - Sweden

a photo of The red house of Gamla Stan, Stockholm, Sweden

The red house of Gamla Stan, Stockholm, Sweden

Unsplash/@hkblind


After Danish King Kristian II successfully invaded Sweden and was anointed King in November 1520, the new ruler called Swedish leaders to join for festivities at the royal palace in Stockholm. At dusk, after three days of wine, beer and spectacles, Danish soldiers carrying lanterns and torches entered the great hall and imprisoned the gathered nobles who were considered potential opponents of the Danish king. In the days that followed, 92 people were swiftly sentenced to death, and either hanged or beheaded on Stortorget, the main square in Gamla Stan (Old Town).

Until this day, the Stockholm Bloodbath is considered one of the most brutal events in Scandinavian history, and some people have reported visions of blood flowing across the cobblestoned square in early November. A little over a century later, a red house on the square was rebuilt as a monument for the executed — fitted with 92 white stones for each slain man. Legend has it that should one of the stones be removed, the ghost of the represented will rise from the dead and haunt the streets of Stockholm for all eternity.

Port Arthur, gruesome prison - Australia

a photo of ort Arthur Prison Settlement, Tasmania, Australia

Port Arthur Prison Settlement, Tasmania, Australia

Flickr/Eli Duke


During its 47-year history as a penal settlement, Port Arthur in southern Tasmania earned a reputation as one of the most notorious prisons in the British Empire. The institution — known for a brutal slavery system and punishment of the most hardened criminals sent from the motherland— claimed the lives of more than 1,000 inmates until its closure in 1877.

Since then, documented stories have spanned the paranormal gamut: poltergeist prisoners terrorizing visitors, weeping children roaming the port and tourists running into a weeping 'lady in blue' (apparently the spirit of a woman who died in childbirth). The museum even has an 'incidence form' ready for anyone wanting to report an otherworldly event.

Poveglia Island, plague victims - Italy

a photo of Poveglia Island, Italy

Poveglia Island, Italy

Mirco Toniolo/ROPI via ZUMA Press


Located off the coast of Venice and Lido, Poveglia sadly reunites all the classical elements of a horror movie: plagues, mass burial ground and mental institute (from the 1920's).

During the bubonic plague and other subsequent pandemics, the island served as a quarantine station for the sick and anyone showing any signs of what could be Black Death contamination. Some 160,000 victims are thought to have died there and the seven acres of land became a mass burial ground so full that it is said that human ash makes up more than 50% of Poveglia's soil.

In 1922 a retirement home for the elderly — used as a clandestine mental institution— opened on the island and with it a fair amount of rumors involving torture of patients. The hospital and consequently the whole island was closed in 1968, leaving all the dead trapped off-land.

Poveglia's terrifying past earned it the nickname of 'Island of Ghosts'. Despite being strictly off-limits to visitors, the site has been attracting paranormal activity hunters looking for the apparition of lost and angry souls. The island would be so evil that some locals say that when an evil person dies, he wakes up in Poveglia, another kind of hell.

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