Trade War: The Indo-Pacific and Bangladesh

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I N T E R N A T I O N A L  A F F A I R S

Tafhim Radita Ali

June 2020 saw Asia at the brink of an all-out war. Tensions rose over a 3,440 km stretch of land, an ill-defined border between India and China. 20 Indian and an undisclosed number of Chinese soldiers lost their lives over a skirmish fought with melee weapons.

Skirmish’s on the Sino-India border is nothing new, but this was the most violent one in decades. Thanks to diplomacy and careful co-ordination on both sides, the conflict was resolved, but it begs the question: What brought this on now of all times?

The border has been disputed since 1975, but the conflict itself is a direct result of more recent developments.

India and China are Asian superpowers, both armed with nuclear weapons and high ambitions. Much of their disputes stem from their recent need to dominate South Asia, the United States only adding fuel to this fire. Both countries face economic repercussions — India at odds with their biggest trade partner, China getting their most popular apps banned in India — but this has done nothing to slow the acceleration of this fight.

It doesn’t help that the Trump Administration has drawn the lines very clearly in the sand.

In a way, India and the US teaming up against China was inevitable, brewing since the Cold War. What is interesting, however, is the role Bangladesh finds itself in.

The US-China Conflict

Since the beginning of his campaign, former President Donald Trump complained about trade partners “ripping off” the US. He took up a staunch stance against China, seeking to expand the market into the southernmost countries of the Asian continent. Trump is not the only US President to try for this strategy, Obama’s “Asian Pivot” aimed at aiding and allying with South-East Asian countries, putting China on edge. The US and China have always been economic rivals, but Trump is the first to escalate this in an all-out war: The Trade War.

Historically, China has always placed relatively high tariffs on their trade partner’s group, undervaluing US goods by an estimated 40%. In 2018, the trade deficit of the US with China was $41.2 billion. Foreign companies set in Beijing have frequently complained about strict regulations. This trade war was a long time coming, and Trump’s claims weren’t baseless.

May 2018 saw the first signs of the Trade War, with the US imposing 25% tariff on $50 billions of Chinese technological goods. After failed negotiations, China retaliated that June with a tariff of similar value. Trump’s desire to forcibly get the Chinese government to reduce tariffs, thus making up for some of US’s trade deficit backfired completely, as the trade deficit stood at a whopping $323.32 billion as of January, 2019, only a year later.

Trade wasn’t the only thing that was disputed over. Journalists from the US were denied visas, and reporters from China had their staff restricted. Tensions rose with the rise of Covid-19, originating in the Chinese province of Hubei. The two countries divided further under Trump, who repeatedly called it the “Chinese virus”.

Between the Trade War and Covid-19, both countries faced losses, the US more so. This, in large part, is due to the heavy reliance of American tech companies on cheap Chinese parts. Small businesses found themselves struggling as well, despite Trump’s protectionist approach.

But for China, another threat approached, much closer to home.

Enter, the Indo-Pacific

China’s Belt-Road Initiative (BRI) is a massive project of roads and shipping routes linking Asia, Africa, and Europe in one, inter-connected network. An homage to the Silk Road, this initiative aims to create safe and efficient world-wide trade. Most countries have received this project proposal positively.

India was not one of those countries. BRI was met with friction and worry in the country, worried about being surrounded by China and losing their own foothold in South Asia. Furthermore, India worries about being indebted to China, as many African countries were by Chinese investments. Many have accused China of engaging in “Debt Diplomacy”, which means that China only invests to trap countries in their debt. China has repeatedly denied these allegations.

For the US, the BRI poses a threat to their power in South Asia. To counter it, Trump coined the “Indo-Pacific Strategy”. The US, India, Japan, and other South-East Asian countries, including our own, banded together to establish safe and quick passages from India to the US, cutting straight through the Bay of Bengal and the Pacific. Not only does this plan omit China, thus diminishing their power in the region, but it acknowledges India as a powerful ally and friend of the US, strengthening their relationship.

The Indian-American partnership was always going to happen, according to Tavi Mandan’s book, The Fateful Triangle, on how China shaped US-India relations. In her books, she explains that the very nature of the relationship is based on the mutual desire to offset China, as both India and the US agree on the threat that China poses economically, strategically, and ideologically.

It’s not only the countries’ governments, but the countries’ leaders themselves who drive this partnership forward. Under Trump’s presidency, US-India relations saw a new high. Modi and Trump got along instantly, and the numbers agreed. Between 2018 and 2019, US exports to India was $34.3 billion (up by 3.3%) and the goods import was $57.7 billion (up 6.3%).

However, the relationship with such a brilliant start was short lived when, recently, Trump made changes to the H-1B visa programme, making it difficult for US companies to hire foreign workers. Not only did this affect the US companies, such as Google, Microsoft, and Apple — enough for them to file lawsuits against this, it also effected India, who had been exporting an estimated $29.7 billion more services to the US in 2019 than in 2018.

This is not the only set-back to India, and the US by extension. While the Indo-Pacific Strategy sounds good in theory, it’s nothing more than a concept. It has a long way to go before it can beat out BRI, a massive project that spans three continents and multiple decades.

Three of the world’s largest countries are hashing it out over economics and politics, but who’s really winning? The surprising answer: Bangladesh.

The benefits (and burdens) of being Bangladesh

Caught between two Asian superpowers is our country. As part of both BRI and the Indo-Pacific Strategy, Bangladesh is a key player in this battle. And despite what some may think, we are reaping the benefits to the fullest.

Bangladesh is a strategic maritime nation and occupies a critical access point to the Bay of Bengal and Indian Ocean. As part of BRI, Bangladesh has received many benefits from Beijing, having signed 27 Memoranda of Understanding (MoUs) with President Xi Jingping. Under the BRI, Bangladesh will receive $26 billion USD for BRI projects and $14 billion USD for joint venture project, together totaling to a $40 billion USD package. On 1 July of this year, Beijing granted 97% of Bangladeshi goods duty-free access, and Bangladesh requested $64 million infrastructure fund.

And despite the debt that many countries fall into, Bangladesh has been treading carefully. Of the 27 MoUs, only 9 came into fruition. Projects are being scrapped and negotiated. In conclusion, Bangladesh is being careful, and they refuse to take a bad deal sitting down.

With the US-China Trade War, our economy has only continued to rise. Our second largest export partner happens to be the US, who are at odds with their own trading partners. With the garments sector making up for 80% of our exports, we saw a rise in demand for our goods as the Trade War escalated. Bangladesh enjoyed a 6.46 percent growth in share in the United States’ market during 2018.

Countries like Cambodia and Vietnam also sought to benefit from this. However, with Bangladesh’s larger population (thus a more labor-intensive workforce), lower minimum wage and lower cost of production, US companies have been turning to Bangladesh for garments and textiles.

With the Indo-Pacific Strategy, once again Bangladesh is a key maritime location. The US has tried to stay in our favour in order to get access to the Bay of Bengal easily.

But while our relationship with China and the US has been developing, we cannot forget our first ally, the first country that recognised Bangladesh as a sovereign state: India. The nation has been considered a friend of our nation since the very beginning, and some set-back are unlikely to bring that to an end.

And there have been quite a few set-backs in these past few years. The Citizenship Amendment Act of 2019, which grants Indian Citizenship to persecuted religious minorities from Bangladesh, Afghanistan, and Pakistan was one of the main strains in the Bangladesh-India relationship. Not only did this act bring negative attention to Bangladesh, as it implied poor treatment of minorities, it also excluded any Muslims who might fall under the criteria to gain Indian Citizenship.

While the economic war and the South Asian power struggle escalates, Bangladesh might be forced to choose a side, despite our philosophy of “friend to all, enemy to none”. So far, we have stayed out of both the India-China border conflicts and the US-China Trade War, but as pressures rise, we must consider where we stand. Economically, we benefit more from China, but we cannot forget what India has done for us. To conclude, what this all depends on most, however, is how far the war will go.

Now that Biden is Here 

With Biden in office, it is safe to say that the US-India relationship will continue to develop. Of course, the new Biden-Harris Administration is likely to crack down on CAA and other human rights violations going on right under Modi’s nose, but to base an economic and political partnership on ideology is not a smart move. In fact, Modi might heave a sigh of relief with Trump now gone, considering the US’ latest policies.

“India needs to be a partner in the region for our safety’s sake and quite frankly for theirs,” Biden told a fund-raiser in his signature blunt style, “The partnership, a strategic partnership, is necessary and important.” It’s simply beneficial to both India and the US to keep strong ties. This will help both countries in their aim to dominate the Indo-Pacific.

US-China relations are where the water gets murky. “The issues that remain between the U.S and China commercial relationship don’t change with [the] change of administration,” said Greg Gilligan, chairman of the Beijing-based American Chamber of Commerce in China. Foreign policy rarely changes with the change in Administration, so anything that Biden does with China will be gradual.

However, Biden is a far cry from Trump, who refused to be diplomatic and sit down for negotiations. The point is, neither country benefits from this Trade War, the US less so, as their trade deficit only grows. While it will be difficult for the two countries to mend relationships, we can look forward to some stability at the very least.

But the Indo-Pacific Strategy, or something of the sort, will likely stay. And India will not comply with the BRI easily. Furthermore, India isn’t the only ones that have brought on the wrath of the US due to human rights abuse. It is unlikely that Biden and Harris will not investigate into the alleged Uighur concentration camps and speak out about the Honk Kong protests. The conflict between these three countries is far from over, and it is unlikely that it will ever end.

China is a formidable opponent to the US and India. As the world moves forward and continues to change, it’s important for Bangladesh to stay on guard and to adapt to these events. Only then can we be more than a pawn in this global game of chess.


The writer is a part of TDA Editorial Team.

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