While any move to better the economic ties with Taiwan is bound to be viewed with suspicion from the PRC, fact remains that beyond leveraging ties with Taipei just to irk Beijing, India needs the island nation given its economic and ICT prowess and this increase even more in a pandemic world order
@Sriparnapathak
New Delhi: As Chinese aggression continues unabated, several countries in South-East Asia find themselves at the receiving end, ranging from the Philippines to Vietnam to Taiwan to India. In this context voices across the globe have grown in favor of closer collaborations between these countries and others.
In India, the voices advocating an end to the adherence to the One-China Policy and giving recognition to Taiwan as a separate country have trebled since the beginning of this year. However, while such diplomatic measures may take time to take shape if at all, what remains pertinent is to take a closer look at the kind of economic relationship that India and Taiwan have had so far.
While a lot of complementarities in the realm of trade remain between the two sides, fact remains that not much has been achieved so far. The novel coronavirus (COVID-19) pandemic while it has led to crashing economies and public health systems across the globe, also presents countries to deepen cooperation in the realm of science and medicine.
Taiwan, which was the first in the world to sound the alarm bells about COVID-19 while it was emerging in China, has done brilliantly to shield its public health system as well as economy from the pandemic. Closer economic cooperation in pandemic goods or even in the medical realm can yield long term benefits.
In 2019, the trade volume between India and Taiwan stood at US$7 billion, growing at a rate of 20 percent year on year. There are at least 80 Taiwanese companies and entities in India, and major Taiwanese exports to India include integrated circuits, machinery, and electronic products. There is a great amount of synergy between India’s current needs; particularly that of the manufacturing sector on the one hand and the Taiwanese machine tool industry on the other.
Taiwan is already among the world’s largest exporters of machine tools and components. The complementarities between the two sides arise because of the differences the two have. The economic structures of Taiwan and India are completely different. Taiwan is a developed and fast-growing economy with a high-skilled labor force. It has a positive balance of trade along with a current account surplus.
It specializes in the exports of high-tech manufactured goods and high value-added services. India has an abundant labor force and low wages. In the face of rising economic costs in the domestic market in Taiwan, India becomes a natural choice. An increase in the number of Taiwanese enterprises in India can help India diversify its export basket into more value-added products.
Taiwan has been keen on furthering economic talks with India and has sought trade talks on several occasions which India in the past has been shying away from to avoid risking the PRC’s ire. However, a trade deal with Taiwan would surely help India’s goal of seeking greater investments in technology and electronics.
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While it looks impossible to envisage a post-COVID-19 pandemic order, the fact remains that countries need to be prepared for possibilities as cases start dwindling or mutating into something worse for that matter. The importance of technology has never been more than has been during the pandemic as workspaces shifted inside homes as work from home became the new normal.
As countries including India seek to leverage 5G and higher forms of Information and Communication Technologies (ICT), it becomes pertinent to increase collaborations with a technologically advanced country like Taiwan. At the height of the pandemic, President Tsai Ing-wen had offered to share how Taiwan used technology to deal with the pandemic. India could use cloud technologies to save data and information on vaccines, to the labor force to medical histories of affected and other aspects.
It makes sense for India to have a trade deal with Taiwan which would enable further investments from Taiwan in technology and electronics. In return, Taiwan could reap benefits out of the sheer size of the Indian market and the ever-rising demands for newer forms of ICT.
One major challenge in this context is India’s high tariffs against imports of certain ICT goods such as phones, amplifiers, digital cameras, base stations, optical fiber cables, and electronic integrated circuits. In fact, in 2019, Taipei had even approached the WTO over India’s imposition of duties on 11 categories of ICT products in excess of India’s bound duty rates for the goods.
A lower tariff regime will surely open up possibilities for Taiwanese companies to export to India. Greater cooperation in ensuring a transparent and stable investment environment would help India in the long run.
Taiwanese companies in India are relatively new entrants in the Indian market. The knowledge and awareness of these firms are low among Indian consumers. The countries, the products of which Taiwanese companies are in competition are those of Japan and South Korea for example. These countries entered the Indian market much before Taiwan and have Comprehensive Economic Partnership Agreements (CEPA) existing with India already.
A Free Trade Agreement (FTA) between India and Taiwan therefore could be beneficial. India and Taiwan could also work on setting up industrial clusters or special economic zones and help them get land and other clearances to set up facilities. Some Indian states have already started such processes and if this could be expanded further across the country then India and Taiwan can leverage the potentials of economic exchanges much better.
While any move to better economic ties with Taiwan is bound to be viewed with suspicion from the PRC, fact remains that beyond leveraging ties with Taipei just to irk Beijing, India needs the island nation given its economic and ICT prowess, and this increase even more in a pandemic world order. In order to better prepare for a post-pandemic order, as and when it emerges, India needs smarter and innovative solutions and a perfect partner for this is Taiwan.-By Dr. Sriparna Pathak
Author Profile: The author is an Assistant Professor and Assistant Academic Dean at the School of International Affairs, OP Jindal Global University, Haryana, India. She can be contacted on Email: sriparnapathak@gmail.com
