International Relations

The high cost of a global economic decoupling

Source: The Hindu

Context

• The U.S. has imposed new tariffs on Chinese imports, reigniting concerns of economic decoupling and highlighting the role of national security in trade decisions.
• The geopolitical tension between China and the U.S., and the resultant protectionist measures, have significant implications for global trade dynamics, affecting economies worldwide.

Details

Key Points

• Tariff Imposition by U.S.:
  • The Biden administration has introduced new tariffs on Chinese imports, targeting sectors like electric vehicles (EVs) and medical devices.
  • This move aligns with political, rather than purely economic, considerations, reinforcing President Biden's pro-union stance and supporting domestic manufacturing efforts.
• Impact on U.S. Domestic Market:
  • Tariffs on Chinese EVs and medical devices aim to reduce dependency on China and promote local industries.
  • However, this protectionist approach may lead to higher consumer prices and increased healthcare costs in the U.S.
• Global Economic Consequences:
  • The S.-China tariff war could delay global green transition targets due to new import restrictions on Chinese clean energy products.
  • Western multinationals relying on China's consumer market may experience reduced earnings due to China's slowing growth and rising household debts.
• Effect on Other Economies:
  • Resource-rich countries like Australia and Brazil could face economic challenges due to reduced Chinese demand for commodities.
  • Southeast Asia's economic prospects might be impacted by U.S. policies on rules of origin and dependence on Chinese technology and investment.
• India's Position:
  • India is expected to benefit from the decoupling dynamics but faces competition from South and South-East Asian neighbours in low-end manufacturing.
  • Despite government initiatives, India's manufacturing sector is still in a catching-up phase and has significant economic ties with China.
• Geopolitical Implications:
  • The ongoing S.-China economic conflict reflects a shift in global trade dynamics, with countries reevaluating their trade policies based on national security concerns.
  • The fragmentation of the global economy and the distancing from World Trade Organization (WTO) rules by major powers pose risks to the liberal international order.

Sources:

The Hindu

International Relations

New dynamics

Source: The Hindu

Context

• The G-7 Outreach Summit emphasized engaging the Global South, discussing global financial and development issues, and highlighted challenges in maintaining influence amid geopolitical shifts and economic uncertainties.

Details

Key Points

• G-7 Outreach Summit:
  • Italy's Prime Minister Giorgia Meloni hosted the summit, focusing on inclusive engagement beyond the traditional "West vs the Rest" narrative.
  • The summit included leaders from BRICS and seven African countries, discussing energy issues.
• Global Issues Addressed:
  • Discussions covered a range of global challenges, including the Russia-Ukraine conflict, support for Ukraine, and the Gaza ceasefire appeal.
  • Emphasis was placed on China’s role in the Indo-Pacific and addressing "industrial targeting" and unfair trade practices.
• Economic and Geopolitical Shifts:
  • The summit underscored the impact of manufacturing slowdowns, the COVID-19 pandemic, and Western sanctions on the G-7's effectiveness.
  • Highlighted the need for the G-7 to reassess its identity and purpose in a rapidly changing global power dynamic.
• India’s Participation:
  • Prime Minister Narendra Modi attended for the eleventh time, focusing on India's democratic achievements, technology, artificial intelligence, and the importance of the Global South and Africa.
  • India’s engagement in the G-7 Summit and its emphasis on larger, more representational forums like the G-20 were highlighted.
• Outcomes and Challenges:
  • The joint communiqué listed global problems but lacked concrete plans for resolution.
  • Discussions on infrastructure projects, including the India-Middle East-Europe Corridor, highlighted a gap between planning and execution.

Sources:

The Hindu

Economy - Infrastructure

To get back on track

Source: Indian Express

Context

• The Indian Railways faces severe challenges with declining market share, safety issues, and stagnant speeds, necessitating urgent policy and administrative reforms to enhance efficiency and competitiveness.

Details

Key Points

• Railway Safety Issues:
  • Recent train accidents highlight ongoing safety concerns.
  • Comptroller and Auditor General (CAG) reports emphasize high asset failure rates, especially signal failures and rail fractures.
  • Despite manning of unmanned railroad crossings, derailments and collisions remain problematic.
• Speed and Punctuality Concerns:
  • No significant increase in average speeds of mail and express trains (stagnant at 50-51 kmph).
  • Freight train speeds have marginally declined.
  • Failure to achieve targets set under Mission Raftar for speed enhancement.
• Market Share and Operational Challenges:
  • Consistent loss of market share in both passenger and freight sectors.
  • Stagnation or decline in total freight and passenger traffic volumes since 2010-12.
  • Comparison with road and air transport growth (6-12% annually).
• Policy and Administrative Issues:
  • Railway Board's inconsistency in policies and plans for future growth.
  • Misplaced priorities on high-cost projects like bullet trains and dedicated freight corridors.
  • Introduction of Vande Bharat trains focusing more on luxury than speed.
• Long-term Implications:
  • Potential relegation of Indian Railways to a secondary role similar to that in countries like the US, Canada, and Australia.
  • Urgent need for a thorough review and reform of priorities to prevent continued decline.
• Economic and Developmental Impact:
  • Importance of a robust railway system for a large, densely populated developing country like India.
  • Need to balance infrastructural investments with safety, speed, and capacity improvements.

Sources:

Indian Express