The Chief Asia Inspector Blog

Quick-fire backfire

                                                  

It is debatable what the EU is trying to do by imposing quick-fire textile quotas on China, now that the restrictive Multi-Fibre Agreement is no more. According to this Guardian article, if it wanted more jobs at home, it is likely to fail.  If it was also trying to look out for its own little guys - developing countries such as Morocco and Tunisia - I would suggest that it is likely to fail in that too. Who looks like the big winner, the guy making all the sweaters now that the dragon’s claws have been ever so slightly dulled? Not the weak or vulnerable, but instead: that other racy Asian economy - India.

AsiaInspection’s tours have shot up like a lunar rocket in India: we made eight times our usual number of inspections there this year. Not that China seems to be suffering too much (at this stage); inspections there have increased threefold.

If you imagine the Asian economies are rising like dough (go on, do it just for a moment), it’s funny how if someone tries to squash a bit back into its pan, another bit puffs out somewhere else. In fact, it seems that all the EU has managed to do is irritate their own importers, retailers and inflation rates. Whoops!

Start Your Engines

Pundits have been predicting for years that India's clichéd "rise of the middle class" will lead to a large demand for the horseless carriage. Now, with total new-car sales in India expected to increase from 1.2 million cars per year to 1.7 million by 2010, the car companies are jostling for pole position. GM., Ford, BMW, DaimlerChrysler, Honda and Hyundai – an impressive list - are all starting or expanding production in India. Lamborghini and Volvo are zooming into town for the first time to sell their wares, while Mercedes-Benz is to add the swank S-class 350 to its factory list in Pune in a smart move to avoid import costs. At the other end of the market, Honda has launched its Civic and has announced it will pump US$650 million into its Indian business over the next ten years.

Petrol is 47.49 rupees ($1.04) a liter and rising, and the India market is still dwarfed by that of the US, but unlike those of America, Indian sales are driving in the right direction for companies. And the Indian government is literally paving the way: they're spending US$45 billion on 31,000 miles (49,900 kilometers) of road over the next six years.

The Silk (and agro-chemicals?) Road

Another historic moment for Asian commerce: since July 6 (yesterday) and for the first time in 44 years, India and China are allowing trade to take place at the Nathu La Pass, a node of the ancient Silk Road between the old Himalayan kingdoms of Sikkim and Tibet. This narrow track some 4,300 metres above sea level, impassable for two thirds of the year, is the tenuous link between two border disputers-cum-trading partners. Much of the trading list could have been written during the Han dynasty 2000 years ago: spices, cashmere, goat skins, yak tails, horses and the famous silk, although watches and agro-chemicals make an appearance as well.

While the pass is currently better suited to mules than trucks and border trade will be limited for at least five years, it has the potential to once again become an important trading route for Asia's two rising economies. According to the Chinese Ministry of Commerce, trade between China and India was worth US$18.73 billion last year (up 37.5% over the previous year), with predictions for this to top US$20 billion this year.

Currently most Sino-Indian trade is effected by sea, obliging India-bound Tibetan goods to be routed through the port of Tianjin (near Beijing), in the opposite corner of the country! Even if only 10% of trade takes the “shortcut” across the Himalayan pass, an impressive US$2 billion worth of goods a year could soon be following this historic trade route.

Not all are convinced of the benefits: Nepalese traders worry they’ll be left out in the cold, animal advocates fear wildlife smuggling, not to mention those who continue to question Tibet’s status. But overall, two peoples haggling over prices in a place where they once pointed guns at each another is surely a sign of progress.