The Great Debate UK

from Breakingviews:

Trade should leave China and India both winners

Decades of mistrust haven't stopped China and India's trade from tripling in the past five years. Now China wants to restart free trade talks when Premier Wen Jiabao visits New Delhi later this week. India has long resisted such an agreement. Yet more open trade should leave both sides winners.

Since the two countries warred over a border dispute in 1962, China and India have had a fractious relationship. But on some issues they agree. India helped China stop an agreement over climate change in Copenhagen that both felt was too soft on rich countries. Chinese and Indian state-owned firms have bid together for oil and gas assets.

While both have benefited from foreign trade, closer union may sound like an unequal bargain. India's trade deficit with China rose to $16 billion in 2007-2008 from $1 billion in 2001-2002, and freer trade might push it wider. China's cheap currency gives it an edge, despite Indian tariffs on many goods. But in the longer term, India could be a big beneficiary too. Despite the widening deficit, India's exports to China have been growing. Indian exports to China surged by 75 percent in the first quarter of 2010, year on year, led by textiles and precious metals. China's cheaply produced goods pose little threat to India's thriving services sector, while in categories like pharmaceuticals, India remains significantly ahead.

Moreover, India looks due to take over some of China's manufacturing lead. Wages in China have been rising rapidly. India's workforce could step into the gap: the country's GDP per capita is a quarter of China's, its median age ten years younger, and its unemployment rate double that of its trade partner. Cheap Chinese power equipment and infrastructure should help India build modern factories, at relatively low cost. Undoing deep mistrust will take time. Indians may worry that China will attempt to keep both low and high end manufacturing, particularly given its reluctance to let the currency appreciate. India may not be prepared to sell more of what China really wants, like iron ore. Free trade between the emerging superpowers is a distant goal, but still one worth pushing for.

from Commentaries:

Free-trade advocates need to get real

President Barack Obama's decision to impose safeguard tariffs on imported tyres from China has drawn predictable howls of outrage from economists, think tank staff and editorial writers -- none of whom has seen their job exported to China. It would be more constructive if they devoted the same effort to devising ways to compensate losers from globalisation in order to shore up waning public support for trade liberalisation.
Between 2000 and 2008, almost 4 million jobs were lost in U.S. manufacturing (22 percent of the total), many as the result of offshoring and increasing competition from lower-cost manufacturers in China and elsewhere in Asia.

Over the same period, the federal government provided just $1 billion per year in extended unemployment benefits and retraining under the Trade Adjustment Assistance (TAA) programme. In the fiscal year ending September 2008, TAA helped fewer than 100,000 workers who had lost jobs as a result of changing trade patterns.

from The Great Debate:

First 100 Days: Obama and trade

Sean West-- Sean West is a Comparative Analytics analyst at the political risk consulting firm Eurasia Group. The views expressed are his own. --

Fear that President Barack Obama will backslide on America’s free trade commitments is misplaced—in fact, he may eventually expand America’s commitment to liberalization. His pledge to revisit the North American Free Trade Agreement (NAFTA) amidst an economic slump was one of his most widely discussed policy positions of the campaign season.

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