“US Set Radical New Terms of Engagement”:
S Jaishankar on Evolving Trade Tensions
India’s External Affairs Minister, S. Jaishankar, recently made a significant statement regarding the shifting dynamics of global trade, asserting that the “US has set radical new terms of engagement.” This comment comes amidst a backdrop of escalating trade tensions and a re-evaluation of international economic relationships, particularly with China, by major global powers. Jaishankar’s remarks highlight India’s perceptive understanding of a new geopolitical and geoeconomic reality, where established norms are being challenged and redefined.
The Shifting Global Trade Landscape
For decades, the global trade system operated largely under the principles of globalization, free trade, and multilateralism, heavily influenced by institutions like the the WTO. However, in recent years, a noticeable shift has occurred:
Rise of Economic Nationalism: Major economies, including the US, have increasingly prioritized domestic industries, supply chain resilience, and national security over pure free-market principles. This has led to protectionist measures, subsidies for domestic production, and restrictions on certain imports.
Decoupling and De-risking: The US, in particular, has pursued strategies aimed at “decoupling” from China in critical sectors like technology and advanced manufacturing, or at least “de-risking” its supply chains to reduce over-reliance on a single country.
Weaponization of Trade:
Trade policies are now often used as instruments of foreign policy, applying pressure on rivals or rewarding allies. Tariffs, sanctions, and technology export controls have become common tools.
Focus on Resilient Supply Chains: The COVID-19 pandemic exposed the vulnerabilities of highly optimized, global supply chains. There’s now a strong emphasis on diversifying supply sources and building more resilient, regional supply networks.
What Does “Radical New Terms of Engagement” Mean?
Jaishankar’s statement points to a departure from the predictable, rule-based multilateral trade system that characterized the post-Cold War era. The “radical new terms” likely refer to:
Bilateralism Over Multilateralism: A greater preference for direct, bilateral agreements and alliances tailored to specific national interests, rather than broad, multilateral consensus.
Strategic Competition: Trade is now intertwined with strategic competition, particularly between the US and China. Economic decisions are viewed through a geopolitical lens.
Values-Based Trade: An increasing tendency to align trade relationships with shared democratic values or strategic interests, rather than purely economic efficiency.
Domestic Prioritization: Policies that prioritize domestic job creation, industrial capacity, and national security, even if it means some trade inefficiencies.
Technological Sovereignty: A drive to control critical technologies and prevent their transfer to strategic competitors.
India’s Position Amidst the Flux
India finds itself in a unique and potentially advantageous position in this evolving landscape. As a large, growing economy and a democratic nation, it is seen as a crucial partner by many countries looking to diversify their supply chains and reduce their reliance on China.
Opportunity for “Friendshoring”: India can benefit from the “friendshoring” trend, where companies relocate production to countries considered geopolitical allies.
Attracting Investment: The push for manufacturing diversification presents an opportunity for India to attract foreign direct investment in key sectors.
Navigating Alliances: India must carefully balance its relationships with various global powers, leveraging its strategic autonomy to safeguard its interests while fostering new economic partnerships.
Domestic Reforms: To fully capitalize on this shift, India needs to continue its domestic economic reforms, improve ease of doing business, and enhance its manufacturing competitiveness.
Jaishankar’s insight underscores that the global trade paradigm has fundamentally changed. For nations like India, understanding these “radical new terms of engagement” is not just an academic exercise but a critical imperative for formulating effective foreign policy and economic strategy in the years to come. The era of predictable globalization is over; the new era demands agility, strategic foresight, and a clear vision for national interests in a fragmented global economy.
