Globalisation in reverse gear: Opportunity for bold US-India partnership?

Globalisation was once thought to be an irrevocable, universal force promoting the greatest good for the greatest number of people. Today, that belief is under challenge. The current trade landscape leads one to ask: Can our world continue its globalising, inclusive, and outward-looking trajectory? Or are we witnessing a resurgence of national isolationism and inward retreat?  

The course that was

In the 1990s, American political philosopher Francis Fukuyama published one of his most notable works, The End of History and the Last Man. The book made the case that the nearing ubiquity of liberal democracy meant the obstacles standing in the way of international cooperation were dissolving. We had almost entered an era of international cooperation that would better the lives of all. Until recently, most nations were converged around this elevated idea that they could join forces in a collective endeavour to create goods, services, and value in the most optimal locales; with seamless and robust global supply chains connecting production centres with their ideal consumers.

Fukuyama’s utopian vision today seems far off, however, as major economic powers step back from the global stage starting with Brexit six years ago. With war-related economic and humanitarian crises in Europe reviving the ancient specter of food scarcity, economic tensions with China, a politically contentious energy transition, and continued technology upheaval disrupting commodity markets, 2023 is shaping up to be another challenging year. Such developments are impacting the global economy, while slowing the pace of globalisation and weakening global supply chains – ultimately reducing openness to international trade. In light of these ongoing events, and the current absence of a robust system of globally integrated value creation and trade, we are witnessing a renewed interest in both regional and bilateral trade agreements and security alliances, as well as localised supply chains.

Of course, this retreat is not an entirely new phenomenon – we have witnessed the cyclical nature of global expansion and contraction in the past. But, at this point in history when forces of conflict and isolation seem to be accelerating, the global economic and security landscape would greatly benefit from a coming together of like-minded nations to reverse these forces. In today’s evolving scenario, there is a clear and compelling opportunity for India to enhance its global strategic importance with some savvy trade policy adjustments.

 Seizing India’s opportunity: The way forward

Recent political turbulence and frictions arising in global investment locales like eastern China have acutely sensitised global investors to the need to relocate to safer harbours. The current geopolitical situation presents an excellent window for India to position itself as a prime hub for global trade and investment, by integrating into global and regional supply chains as a trusted Asian node.

That said, a radical and ambitious ‘China Plus One’ strategy for inward investment would also require intentional steps: ensuring regulatory ease, business-process simplification, reduced logistics and transport friction, and upskilling the workforce. The sheer economic and commercial logic behind pan-national value chains underlines the importance of facilitating ease of capital investment and trade.

Given India’s shared geopolitical concerns with the US vis-à-vis China, it would be useful to craft a calibrated economic partnership between India and the US that encompasses both domestic needs as well as geopolitical priorities. During his previous term as Vice President, President Joe Biden famously set an ambitious target of $500 billion for Indo-US trade. While progress has accelerated of late, quite a distance remains to be covered.
 

India could also play a major role in free or preferential trade arenas, both bilateral and multilateral. The US-India Trade Policy Forum, which remained inactive for years, has been revived and would be a forum to discuss both bilateral issues and joint approaches to trade in the Indo-Pacific. The Indo Pacific Economic Framework amplifies the opportunity for such engagement.

New Delhi’s decision to stay out of configurations like the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) keeps India out of major evolving trade blocs. While there are legitimate geopolitical reservations relating to RCEP, India may consider a forward-leaning approach to the CPTPP much as the distant UK has done.

 On the geopolitical front, from an India-US standpoint, the Quad could consider seriously expanding its economic dimensions beyond the current focus of vaccines and related financing to also include broader trade and investment, cooperation in financing, standards, and collateral areas.

Defence is another sector with great potential to serve both the common strategic considerations and the desire to create jobs shared by both countries. India has already been designated as a Major Defence Partner of the United States, with a clear opportunity to increase the manufacturing and sourcing of defence equipment from Indian firms.  

Given the complementarities in ethos, vision, and aspirations between India and the US, both countries must engage more closely in shaping the rules of a new world order. Doing so will surely reap benefits for India, the US, and the world.  
 
The writer is Managing Partner, Celesta Capital; former US Assistant Secretary of Commerce for Global Markets and Director General of the US & Foreign Commercial Service (USFSC) in the Obama Administration; and former Chairman & CEO of KPMG India