1.In centenary backdrop, this is no hand of peace

Beijing’s recent and muscular behaviour towards India could stem from deeper tensions within China

An atmosphere of unpredictability prevails as regards India-China relations, even as China embarks on its 100th anniversary celebrations of the foundation of the Communist Party of China (CPC). Memories of the bloodiest clash in recent decades that occurred in the Galwan Heights in June last year, are still vivid in India’s memory. The situation in Eastern Ladakh currently remains tense. After some progress in talks over troop disengagement in the vicinity of Pangong Tso Lake and the Kailash ranges, matters have since reached a stalemate. Meanwhile, there is new information on China’s manoeuvres in the border regions across Ladakh. China is reportedly raising new militia units comprising local Tibetan youth, to be deployed in Eastern Ladakh, for both high altitude warfare and surveillance. India has, meanwhile, been expressing its concern to China about the continuing ‘close up deployments’, which has only produced a strong verbal riposte from China.

All this has left an indelible imprint on the state of relations between the two Asian giants, who share a several thousand kilometre land border. Answers to the question as to why China chose to attack Indian positions in Ladakh, without any provocation, causing the death of a platoon of soldiers belonging to the Bihar Regiment, are still not forthcoming. An answer needs to be found before a reset in India-China relations can take place.

Global concerns

India’s concerns about China are grounded in reality. Other nations today have, however, begun expressing concern about the threat posed by China to the existing world order. During the past month, both the G-7 and North Atlantic Treaty Organization, have criticised China for its military ambitions and the threat it posed to world peace. China is, however, unlikely to be deterred by any of this, and its mindset is best revealed by its actions in the South and East China Seas, its treatment of its Uighur Muslim minority, and its actions in Hong Kong.

A lesser nation might be deterred by the kind of criticism that China faces today, but it does not seem to impact China. Moreover, and notwithstanding the hype surrounding India’s membership of the Quad and the role assigned to it by the United States and the other western powers in the Indo-Pacific, to think that this may have rattled China, compelling it to indulge in actions that verge on the erratic would be a mistake. China could be expected to have fully catered for all such eventualities.

Going back into the past

We may, hence, need to look elsewhere to find a proper explanation for China’s behaviour vis-à-vis India, and also elsewhere. Delving into China’s recent past, and examining periods when it possibly acted in a similar erratic manner, may provide some clues. In the late 1950s and 1960s, China’s then Chairman, Mao Tse Tung/Mao Zedong, when finding himself in a difficult situation on account of his ill-conceived policies and programmes (history tells us that Mao confronted one of the worst famines in history on account of his misadventure of the Great Leap Forward Movement) rather than accepting his mistake and retracing his steps, embarked on his campaign to attack India, in spite of the close friendship that existed at the time between the two countries.

Later, it was surmised, that Mao’s actions were intended partly to divert attention from China’s internal turmoils at the time, and possibly more important, to counter the dissidents who existed within the CPC, and who were critical of Mao’s autocratic attitude and his ill-conceived policies. Other instances of this kind exist and can be quoted: Deng Xiaoping’s behaviour following the Tiananmen Square movement in the 1980s, is an excellent example.

A leader in a hurry

Xi Jinping is seen today as a Mao clone, someone who seeks to achieve the same kind of dominance over the CPC as the latter. Like Mao, he is a man in a hurry, seeking to consolidate his power and achieve a pre-eminence of the kind enjoyed by Chinese Emperors in the past. He has assiduously attempted to accelerate the pace at which China expects to overtake the U.S. as the world’s number one super power which, however, seems to be stalling for a variety of reasons. China’s attempt, under Mr. Xi, to become the world’s most powerful military is also nowhere in sight.

On the other hand, China’s misadventure in the Ladakh heights in June last year, exposed certain shortfalls with regard to mechanisation of China’s People’s Liberation Army (PLA), diminishing the latter’s hopes of becoming fully mechanised by the time the PLA celebrates its Centenary in 2027. Much of the blame for both situations is being attributed to Mr. Xi. Given the extent of concentration of power in his hands, this is leading many in the Party to question Mr. Xi’s claims to omniscience.

Apart from this, several of Mr. Xi’s other ideas have run into difficulties. His plans to remake the global order on terms favourable to the CPC seem to have gone awry. The Chinese economy — though performing better than most other world economies — is showing signs of slowing down. Mr. Xi had been betting on technological prowess and economic heft to achieve the kind of geo-political transformation that he wished for, but this is clearly not happening at present.

Most important, and despite having accumulated so much power, Mr. Xi seems to be finding it difficult to push through his ‘new socialist ideology with Chinese characteristics’ (through which he hoped to demarcate himself from his immediate predecessors like Hu Jintao) and is intended to be his lasting legacy.

There are some clues

Undoubtedly, therefore, Mr. Xi is finding himself in a difficult situation, including within the Party. There is an old Chinese proverb that says “the wind sweeping through the tower heralds a storm rising in the mountain” and this, perhaps, provides a clue to Mr. Xi’s, and Chinese, behaviour in the recent period. The extent of inner-party tensions is little known to the world outside, given the opacity of Chinese society, but the existence of dissidence or dissension within the CPC is no secret, however.

While it is generally believed that the CPC is a monolith entity, the reality is otherwise. In the 100 years of its existence, the CPC is known to have gone through several transformations, many of an ideational nature, leading to serious upheavals. Deep fissures have existed, and perhaps, still exist, within the party, though the extent may not be known outside. What is generally seen is that during such periods, China’s attitude often borders on the erratic. The question is whether something of this nature is occurring at present inside the CPC and China.

It is tempting to think that history is again being repeated, and China’s recent erratic behaviour is largely due to growing inner-party criticism of Mr. Xi’s policies and actions, rather than due to extraneous factors. The Ladakh adventure (or misadventure) could well have been a misguided attempt by Mr. Xi to demonstrate to his opponents within the CPC that he is well and truly in command. One could also anticipate that this could well be a prelude to a limited purge of dissenters within the highest echelons of the CPC.

An accumulation of problems does produce in closed societies (such as China) a ‘pressure cooker’ syndrome, where the safety valve is often in the hands of the leadership. If the latter is precariously poised, and out of sync with reality, it leads to erratic behaviour. What may be aggravating Chinese leadership concerns at this time also is that the world is seemingly tilting towards India at this juncture, regarding it as more sophisticated, diplomatically, and more flexible, ideologically, compared to an increasingly obdurate China. Within the CPC itself, there are reportedly quite a few who prefer ‘peaceful coexistence’ to sustain peace, as compared to Mr. Xi’s more muscular approaches.

India needs to be on guard

A final thought. It is worth remembering that Mr. Xi is one of the few world leaders known to have made a study of Goethe’s works, including Faust. Not only that, some of Mr. Xi’s actions, such as modelling himself on Mao and a practising advocate of Maoism 2.0 — despite the humiliation both he and his father suffered at the hands of Mao prior to, and during the Cultural Revolution — tend to make him out to be something of a Faustian character. Was Mr. Xi, through his aggressive behaviour in Ladakh, and notwithstanding the warm relations that he is known to have with India’s Prime Minister Narendra Modi, preparing the ground for a ‘Faustian Bargain’. If so, Mr. Xi has made yet another serious miscalculation, not only about the ground situation but also the mood of the nation and its leadership. This could cost him dear. What all this suggests is that ‘peace is not at hand’, and that India should expect, and prepare for, more situations of this kind, with many more provocations coming from China.

Background

Two top American lawmakers have moved a key legislation in the Senate which seeks to advance the US-India strategic relationship.

• The legislation will amend the Arms Control Export Act to bring India at par with the US’ NATO allies– Israel, Australia, New Zealand and South Korea for purposes of selling military items under the ITAR (International Traffic in Arms Regulations) list.
• There are two technology control lists in the US system – one is under the Export Administration Regulations, which places controls on the sale of dual-use items that have both civil and military uses and the second is the ITAR list.
• The civil nuclear deal paved the way for India to access items on the first set of lists, i.e. those under the Export Administration Regulations.
• The Arms Control Export (AEC) Act governs the ITAR list. The amendment, therefore, will make it possible for the US to fulfil India’s operational requirements in quick time, thus improving its reliability on supplies.

North Atlantic Treaty Organization

• North Atlantic Treaty Organization (NATO) is a military alliance established by the North Atlantic Treaty (also called the Washington Treaty) of April 4, 1949, by the United States, Canada, and several Western European nations to provide collective security against the Soviet Union.
• A key provision of the treaty, the so-called Article 5, states that if one member of the alliance is attacked in Europe or North America, it is to be considered an attack on all members. That effectively put Western Europe under the “nuclear umbrella” of the US.
  
  
  • NATO has only once invoked Article 5, on September 12, 2001 following the 9/11 attacks on the World Trade Center in the US.
• As of 2019, there are 29 member states, with Montenegro becoming the latest member to join the alliance in 2017.
  
  
  • France withdrew from the integrated military command of NATO in 1966 but remained a member of the organization. However, it resumed its position in NATO’s military command in 2009.

Recent Issues

• A big source of the internal strain is American President Donald Trump’s recurrent demand that countries devote an amount equal to at least two percent of GDP to defence spending In 2018.
  
  
  • However, only seven of NATO’s 29 member states hit the two-percent target.
• Strained relationship over selling of defence equipments.
  
  
  • The US has halted delivery of

equipment related to its F-35 fighter jets to Turkey over its plans to buy Russia’s S-400 missile defence system.
U.S. wants Turkey to buy the Patriot defence system of the USA, instead of Russia’s S-400s.
Recently, the Republic of Macedonia changed its name to the “Republic of North Macedonia” to enter the North Atlantic Treaty Organization (NATO) and the European Union (EU) as its accession to both organizations was vetoed by Greece.
The move comes after India and the US signed the COMCASA (Communications, Compatibility and Security Agreement) in 2018.
The two countries are also in advance discussion to sign another foundational agreement of the BECA (Basic Exchange Cooperation Agreement).
It also comes ahead of President Donald Trump’s scheduled meeting with Prime Minister Narendra Modi on the sidelines of the G20 Summit in Osaka, Japan.

Importance

• The amendment is moved as part of the National Defense Authorization Act 2020 of the USA, giving a big boost to India-US defence trade.
• This would remove current legislative barriers to export of major high-tech defence equipment to India which is normally shared with only a few countries.
• Although, it is an important signal of US political support for enhancing defense ties but is unlikely to have tangible impact on trade flows in the near term.
• The amendment needs to be passed by both the Senate and the House of Representatives before it can be signed by the US President into law.

2.India sees ‘consensus’ by Oct. on OECD-G20 global tax deal

Share of profit allocation, subject-to-tax rules’ scope yet to be addressed: FinMin

A day after joining the OECD-G20 framework for a global minimum tax, the Finance Ministry on Friday said significant issues including share of profit allocation and scope of subject-to-tax rules were yet to be addressed, and a ‘consensus agreement’ was expected by October.

A total of 130 countries on Thursday agreed to an overhaul of global tax norms to ensure multinationals pay taxes wherever they operate and at a minimum 15% rate.

The solution should result in allocation of meaningful and sustainable revenue to market jurisdictions, particularly for developing and emerging economies, the Ministry said in a statement. A majority of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting members (including India) on Thursday adopted a statement containing an outline of a consensus solution to address tax challenges arising from digitalisation of the economy, it added.

It comprises Pillar One — reallocation of additional share of profit to the market jurisdictions, and Pillar Two — regarding minimum tax and subject-to-tax rules.

Deloitte India Partner Sumit Singhania said the consensus would quicken ongoing efforts to reset the almost century-old international tax rules. It provides an objective definition for “largest (sales more than €20 billion) and most profitable (more than 10% global profitability) MNEs to be subject to new nexus and profit allocation rules,” he added.

Why in News? 

• Meeting of the Leaders’ of the G-20 Nations, in Buenos Aires, Argentina.

What is G20?

• The G20 is an informal group of 19 countries and the European Union, with representatives of the International Monetary Fund and the World Bank.
• The G20 membership comprises a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, 80% of global investment and over 75% of global trade.

Origin

• 1997-1999 ASIAN Financial Crisis: This was a ministerial-level forum which emerged after G7 invited both developed and developing economies. The finance ministers and central bank governors began meeting in 1999.
• Amid 2008 Financial Crisis the world saw the need for a new consensus building at the highest political level. It was decided that the G20 leaders would begin meeting once annually.
• To help prepare these summits, the G20 finance ministers and central bank governors continue to meet on their own twice a year. They meet at the same time as the International Monetary Fund and The World Bank.

How G20 Works?

• The work of G20 is divided into two tracks:
  • The finance track comprises all meetings with G20 finance ministers and central bank governors and their deputies. Meeting several times throughout the year they focus on monetary and fiscal issues, financial regulations, etc.
  • The Sherpa track focuses on broader issues such as political engagement, anti-corruption, development, energy, etc.
    • Each G20 country is represented by its Sherpa; who plans, guides, implements, etc. on behalf of the leader of their respective country. (Indian Sherpa, at the G20 in Argentina, 2018 was Shri Shaktikanta Das)

G20 Members

• The members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.
• Spain as a permanent, non-member invitee, also attends leader summits.

Structure and Functioning of G20

• The G20 Presidency rotates annually according to a system that ensures a regional balance over time.
• For the selection of presidency, the 19 countries are divided into 5 groups, each having no more than 4 countries. The presidency rotates between each group. Every year the G20 selects a country from another group to be president.
  India is in Group 2 which also has Russia, South Africa, and Turkey.
• The G20 does not have a permanent secretariat or Headquarters. Instead, the G20 president is responsible for bringing together the G20 agenda in consultation with other members and in response to developments in the global economy.
• TROIKA: Every year when a new country takes on the presidency (in this case Argentina 2018), it works hand in hand with the previous presidency (Germany, 2017) and the next presidency (Japan, 2019) and this is collectively known as TROIKA. This ensures continuity and consistency of the group’s agenda.

Cooperation

• In Toronto in 2010, leaders declared it to be the premier forum for global economic co-operation.
• The work of G20 members is supported by several international organisations that provide policy advice. These organisations include:
  • The Financial Stability Board (FSB). The FSB, which was established by G20 leaders following the onset of the global financial crisis,
  • The International Labour Organization (ILO).
  • The International Monetary Fund (IMF).
  • The Organisation for Economic Co-operation and Development (OECD)
  • United Nations (UN)
  • World Bank
  • The World Trade Organization (WTO)
• The G20 also regularly engages with non-government sectors. Engagement groups from business (B20), civil society (C20), labour (L20), think tanks (T20) and youth (Y20) are holding major events during the year, the outcomes of which will contribute to the deliberations of G20 leaders.

Issues Addressed by G20

• The G20 focuses on a broad agenda of issues of global importance, although, issues pertaining to the global economy dominate the agenda, additional items have become more important in recent years, like:
  • Financial markets
  • Tax and fiscal policy
  • Trade
  • Agriculture
  • Employment
  • Energy
  • Fight against corruption
  • Advancement of women in job market
  • 2030 agenda for Sustainable development
  • Climate Change
  • Global Health
  • Anti-terrorism
  • Inclusive entrepreneurship

India’s Priorities in G20 Summits

• Checking tax evasion to fight corruption
• Choking terror funds
• Cutting the cost of remittances
• Market access for key drugs
• Reforms in the World Trade Organisation to improve its functioning
• “Full implementation” of the Paris Agreement

Achievements

• Flexible: With only 20 members, the G20 is agile enough to make prompt decisions and to adapt to new challenges.
• Inclusive: The inclusion every year of invited countries, international organizations and civil society organization through engagement groups allow for a broader and more comprehensive perspective when assessing global challenges and building consensus to address them.
• Coordinated action: The G-20 has also played a crucial role in strengthening the international financial regulatory system, including better coordination across countries.
• Facilitated an increase in lending from multilateral development banks of US$235 billion at a time when private sector sources of finance were diminished.
• Major achievements of the G20 include quick deployment of emergency funding during the 2008 global financial crisis.
• It also works for reforms in international financial institutions by improving oversight of national financial institutions. Such as G20 driven reforms to the international tax system, through the G20/OECD Base Erosion and Profit Shifting (BEPS) project and implementation of tax transparency standards.
• G20 played a critical role in the ratification of the Trade Facilitation Agreement, with the WTO estimating it could contribute up to somewhere between 5.4 and 8.7% to global GDP by 2030 if the agreement were fully implemented.
• Better Communication: G20 bring World’s top developed and developing countries together to bring consensus and reasoning into decision making through discussion.

Challenges

• No Enforcement mechanism: The G20’s toolkit ranges from simple exchanges of information and best practices to agreeing common, measurable targets, to coordinated action. None of this is achieved without consensus, nor is it enforceable, except for the incentive of peer review and public accountability.
• Not legally binding: the decisions are based on discussions and consensus which culminates in the form of declarations. These declarations are not legally binding. It’s just an advisory or consultative group of 20 members.

Way Forward

• The G20 cannot be a panacea for the world’s problems. But over the past 10 years, the G20 has been an important forum for international cooperation.
• Effective global governance, like the G20, is essential as rising powers seek opportunities to influence and contribute to the global order.