India's exporting community did not have to wait long for the incentives that the Commerce Ministry promised would come before Diwali. Pressured by export associations, the Ministry recently announced a couple of sops that will cost the exchequer Rs. 1,700 crore.

The stated concern is the weakening demand in traditional markets, US and Europe, and the need to diversify exports to “non-traditional markets” in Latin America, Africa and the Commonwealth of Independent States (CIS).

To those who have not lived under a rock all these years it would be evident that the Commerce Ministry has not said anything new, apart from spending more of the public money: market diversification, export basket expansion and simplifying procedures have been part of the Ministry's and exporters' lexicon for ages and shall continue to do so.

Exporters should not need a crisis in their traditional markets to diversify; they must anticipate shifts in demand and build bridges to newer markets as China has been doing for decades.

The Great Game redux

In India too, the drive for diversification has been around for some time but the attempts have been patchy and ad hoc; exports to non-traditional markets in the developing world are not easy for various reasons: freight costs to Latin America and uneven economic and political development in Africa with its oil and gas rich nations the favoured destinations of exporters such as China.

Indeed, the search for export markets and natural resources by China is not every different from colonisation drive in the eighteenth and nineteenth century — called the Great Game. Hence, the last two decades have shown that exports are not just a matter of the movement of tradables alone; they are part of a grand strategy for more lasting and bilaterally exclusive relationships.

Consider the central Asian regions that figure on the Commerce Ministry radar ever so often. Kazakhstan, the second largest of the CIS after Russia, has historically occupied a very important space in the mindset of its gigantic neighbours, Russia and China.

Since the 17th century the country has been a sort of buffer, its relationship with its eastern neighbour fraught with border disputes till the erstwhile USSR's existence settled matters for seventy years. When the Soviet Union collapsed and Kazakhstan became independent in 1991 China was the first to offer its blessings.

A new attempt at warmer relationship has been on over the last decade, determined no doubt by the Kazakhs' need to neutralise its western neighbour and for the Chinese to gain access to its huge natural resources and potential markets for its growing manufactures.

Both countries worked at settling their 1,700-km long, centuries' old border dispute all through the nineties, investments by China lubricating the efforts. A 3,000 kilometre oil and gas pipeline between the two nations, one rich in oil and gas the other an eager buyer, seemed to seal the new-found friendship.

But Russia has been no less busy. It has pulled its former partner in the USSR into a tripartite customs union with Belarus that remains contentious, laden as it is for the Kazakhs with their accumulated fears of Big Brother revanchism.

But for India, both China and Russia may prove the point that today exports are not what they seem; a component of the trade balance, but a part of a grander strategy of bilateralism underwriting a newer quasi-colonialism, softer in its appearance but no less economically driven than the nineteenth century one for raw materials and markets.

China's march

Consider how the Chinese turn challenge into opportunity. According to official statistics cited by Weng Xunzhang of the Henan Institute of Engineering, 7.5 per cent of China's export enterprises shut down after the September 2008 crisis. One million export-import enterprises in China have driven that country's gigantic trade surplus.

Mr Weng tells us that after 2008 China tweaked its strategy to encourage export enterprises to maintain the focus on developed markets, their “basic market”, next, hone in on the potential in developing markets and finally, pay attention to “immature markets” in the developing world with vast areas, low population, industrial backwardness (Mongolia, Sub-Saharan Africa). Mr Weng suggests firms would “actively occupy such markets” and lay the foundation for future export capability. A related strategy was to move away from “low price, high volume” to enhancing technological content and added value. Lenovo, Haier and other Chinese giants Huawei spring to mind.

But Mr Weng is not telling us anything that has not been observed since the nineties. China has single-mindedly focused on the developed markets but assiduously built its way into the African continent following the market penetration strategies noted by him as unique to the post-September 2008 crisis: a slow painstaking build-up in the more developing markets.

Second, the movement to high technology exports has been no less evident since mid-nineties. While the world witnessed a growth in high-technology manufactured exports, China's was the most phenomenal jumping from 6 per cent of the China's total exports in 1995 to 20 per cent in 2008 even as Japan's own high technology exports eroded from 18 per cent of its total exports to 8 per cent and the US's share fell from 21 to 14 per cent. Part of this was explained by a major shift in R&D expenditure by American multinationals to the East Asian region, namely China, Korea and Singapore.

Bit player

India's attempts to bolster exports sound puny; they are also irrelevant for the purpose at hand because the rules of world trade have imperceptibly but inexorably changed. Not only are there more exporters but as Raghuram Rajan once wrote, there are less buyers; competition is therefore more fierce and nowhere is this more evident than in the dramatic shifts in high technology exports.

The Great Game has been in full swing and India figures as bit player.

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