Q.35) ‘Quadrilateral Security Dialogue (QUAD)’ is the transforming itself into a trade bloc from a military alliance, in present times – Discuss.(GS-2: INTERNATIONAL RELATIONS, UPSC CSE 2020) (Answer in 250 words,15-marks)

INTRODUCTION:In the backdrop COVID-19 outbreak and increased Chinese assertions of power in the region there has been a call for strengthening the QUAD in the Indo-Pacific. India has followed a cautious approach till now. However, the Indo-China border clashes in June have led to renewed talk in India about relevance of the Quad which is mainly thought of in military terms.But it could also form the basis of a trade agreement with significant gains for India’s economy and exports.

TRANSFORMING THE QUAD

There are many reasons for elevating economic engagement with Quad nations— the four countries with over 1.8 billion people represent a quarter of the world’s population and over $30 trillion in combined GDP. Trade between the four countries exceeded $440 billion in 2018, with nearly $6 trillion in trade with the rest of the world. In 2019, India and Japan jointly signed a port deal with Sri Lanka for the development of East container Terminal at the Port of Colombo. This Step was a big leap to project the QUAD countries economic collaboration.

Regional trade agreements have been emerging due to the deadlock of the WTO’s Doha Round. Against this backdrop, a new regional bloc called ‘Indo-Pacific’ has gained high prominence. Originally, this regional cooperation was aimed to foster a quadrilateral alliance between the United States, Japan, Australia, and India. However, several South, Southeast, East Asian and Pacific Island economies including Vietnam, New Zealand, Bangladesh, Sri Lanka and some of the Indian Ocean Rim (IOR) countries have shown interests in joining the Indo-Pacific group.

When diversification of supply chains or decoupling from China is the need of the hour, it looks like moves are afoot to continue with China as the hub of world manufacturing.In this context, if the Quad wants to be successful as a security alliance, it must be a strong economic alliance as well.

The Quad foreign ministers have stressed the need to build “resilient supply chains”, which essentially means non dependence on one particular country as a manufacturing base. Japan proposed a “Supply Chain Resilience Initiative” (SCRI), comprising Japan, India and Australia. This has the potential to develop into an alternative trade bloc—a Quad and Quad-plus trade bloc.

As Quad countries value their diplomatic flexibility,they fear that a military agreement will hinder their ability to negotiate independently with China. However, the advantages of free trade between these nations go beyond strategic advantages. As the world reels from the impact of the pandemic and the global economy shifts towards greater protectionism, a FTA between Quad nations would also improve their place in the global value chain.

Moreover, the COVID19 pandemic has taken a toll on the global economy, including Quad nations in sectors ranging from employment to investments. Thus, deepening their economic relationships for increased freedom and cooperation will facilitate a swifter recovery from the pandemic’s impact.

To propel growth, India will need to explore economic partnerships with like-minded countries such as the “Quad nations” to counter Chinese influence more effectively. A recent study simulated effects of a Quad trade agreement. In a Quad trade agreement where bilateral tariffs are scrapped, India’s real GDP could increase by 0.2% or $2.7 billion a year, while exports could rise by 2.5% or $5.7 billion. Sectors where India’s exports are competitive such as clothing, textiles and light manufacturing would gain the most. If the Quad does away with tariffs and lowers trade costs by 25%, India’s real GDP could increase nearly 2% or $23.5 billion a year. Strategic relations with the Quad, including a FTA, are in India’s best interest to counter Chinese assertiveness and secure its vision for the Indo-Pacific.

HURDLES

• Economic freedoms in these countries are vastly unequal. While Australia is considered the fourth freest world economy by the 2020 Index of Economic Freedom, Japan and the U.S. are ‘mostly free’ by the same metric and India is considered ‘mostly unfree’.
• Although India is attractive as an alternative manufacturing hub, its relatively lower economic freedom and some restrictive policies are obstacles to this.
• Indo-Pacific region’s dependence on China as a manufacturing base is getting deeper by the day. China’s participation on the RCEP indicates that countries like Japan and Australia have decoupled geopolitics and economic interests as a policy imperative

CONCLUSION:

QUAD countries need to understand the better collaboration should also be there in the economic sense also.The future of QUAD will be blurred if these nations are unable to cooperate in economic terms.Also, the regional dynamic in the Indo-Pacific should be a wakeup call to Indian policy makers to make domestic reforms a corner stone to secure India’s economic growth.India should focus on structural changes to prioritize domestic ease of doing business. With these domestic changes, India would be remiss not to capitalize on the opportunity to become a manufacturing hub and facilitate an FTA with the Quad.