With perceptible reliance in terms of trade in goods and services, the EU, India and China are dependent on each other, even as the EU attempts to reconfigure its relationship with China
Globally, surging economic fragmentation in the form of trade barriers, restrictions, and sanctions not only increases the gap in financing for sustainable development, but also makes developing countries more fragile, vulnerable and prone to frequent meltdowns. The ongoing polycrisis has resulted in an increase in trade protectionism. Despite repeated reiterations by nation-states underscoring the need for building greater cooperation and robust partnerships, economic fragmentation is on the rise. As per the International Monetary Fund (IMF) new trade barriers, that were introduced on an annual basis, has almost tripled since 2019 to about 3,000 in 2023 (Figure 1).
Figure 1: Number of trade restrictions imposed annually worldwide
Source: Global Trade Alert & IMF
Alongside, talks of decoupling, interrupted capital flows, increasing threat posed to the digital space, and uneven distribution of income are adding to the mounting challenges of global economic integration. As societies become more digitally-enabled and technology-driven, there are also heightened concerns about cyber-security, trade wars, surveillance, and sabotage of infrastructural capacities. This gains further traction in light of increasing Chinese footprints in artificial intelligence (AI), procuring critical raw minerals, securing energy sources, strengthening its maritime presence in the South China Sea and, subsequently, aiming to acquire global supremacy. Further, conflicts breaking out across the globe, be it Ukraine or the Gaza Strip, has resulted in stringent economic sanctions by several powers including the United States (US) and the European Union (EU) on Russia and also China.
Being one of the largest development providers in the world, the EU is known for its top-notch standards, good regulatory mechanisms, and administrative practices.
Moreover, official development assistance (ODA) equally forms a critical component in supporting the development trajectories of several low-income and other developing economies. Yet, actual on-ground implications of development cooperation continue to be fuzzy. Against this backdrop, geopolitical contestations, such as the intensifying Sino-US rivalry, are now reaching the brink of extreme polarisation in the international landscape. Naturally, the EU is unnerved and finds itself in a sticky spot. Being one of the largest development providers in the world, the EU is known for its top-notch standards, good regulatory mechanisms, and administrative practices. But even after two decades of inking its strategic partnership with India, the true potential of this partnerships remains untapped. On the other hand, the EU’s relationship with China has weathered several phases from a ‘competitor’ and a ‘systemic rival’, to ‘decoupling’ and finally ‘derisking’. Ambiguous as it seems, it lacks a comprehensive and long-term strategy of tackling China’s growing power in multiple domains.
As the international development architecture witnesses an evolution of sorts, the rise of the global South like India and China is pertinent. Attempting to ably shoulder the responsibility of providing technical and humanitarian support towards establishing cooperative frameworks is their way of constructing their own development narrative. However, clubbing New Delhi and Beijing together as like-minded drivers of South-South cooperation (SSC) may not be correct. With different perspectives and praxis, China’s development cooperation model is based on a market imperialist strategy aiming to expand its geographic outreach and establish its economic linkages by creating debts and dependencies. Although, post the COVID-19 pandemic, Beijing is attempting to refurbish its global image by stepping into softer sectors like humanitarian development cooperation, sustainable development, climate change, poverty reduction, and creating resilient food supply chains. But its foundational development modality remains the same. In this sense, the recently concluded 24th EU-China Summit in December 2023 yet again failed to bear any constructive results between the two.
With different perspectives and praxis, China’s development cooperation model is based on a market imperialist strategy aiming to expand its geographic outreach and establish its economic linkages by creating debts and dependencies.
India’s stance to put forth the concerns and voices of the Global South has been acknowledged as a welcome step by the advanced economies, including the EU. By raising issues of food, fuel and fertiliser, India has not only spoken for itself but also on behalf of the diverse set of developing economies who do not find the platform or space to voice their concerns. Also, in the recently concluded 3rd Voice of the Global South Summit, India’s shared vision of establishing a four-fold ‘global development compact’ for realising the SDGs is a significant step.
Further, New Delhi’s development partnerships have come to occupy a pivotal portion of its development diplomacy in recent years. With an explicit recognition for diversifying sources, avenues and alternatives models of development, India is trying to put its best foot forward towards pushing the sustainability narrative. However, relations between India and China have remained unsteady and tumultuous over the years. Also, India’s trade dependence on both China and the EU has increased significantly. According to UNCTAD, India’s trade reliance on China and EU has increased by 1.2 per cent each in 2023 and it is expected to rise further i.e., by 2 per cent in the first quarter of 2024.
With such perceptible reliance in terms of trade in goods and services, the EU, India and China are obviously quite dependent on each other. However, for EU to overlook either one of them is difficult and not recommended. Representing two primary engines of the Southern economies and enjoying high levels of demography, India and China are, in fact, the pivotal cogs in the development wheel. The EU certainly cannot afford to ignore either India or China if it has to sustain its presence and relevance in today’s geostrategic and geoeconomics world. At the same time, it needs to choose its partners wisely. Given India’s philosophy of “Vasudhaiva Kutumbakam” or One Earth, One Family, One Future, and its attempts to create a shared vision for charting the development journey of the Global South, Brussels must be receptive of such positive engagements. At the same time, there is an alarming need for the EU to reassess and reconfigure its China position, which can potentially balance its security ambitions with its economic aspirations. With tensions breaking out at the drop of the hat in contemporary times, formulating a robust, comprehensive, clear and long-term China strategy should be high on the EU’s to-do list. It is not to say that a strategy will always safeguard Brussels from any further mistrust or hostilities, but it will certainly provide a sense of direction to its global leadership.
Swati Prabhu is an Associate Fellow at the Observer Research Foundation.
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Dr Swati Prabhu is Associate Fellow with the Centre for New Economic Diplomacy at the Observer Research Foundation. Her research explores the interlinkages between development ...
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