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EAM's interaction on Mindmine Mondays, CNBC (July 21, 2020)

July 30, 2020

Mr Sunil Kant Munjal: So welcome to another edition of "#MindmineMondays". Its been said that diplomacy is like banking. It is about building up deposit of goodwill to use when necessary. Today's guest is a career diplomat turned political leader and using all the goodwill he has built over a remarkable and a varied career to secure and strengthen India's position on the world stage. I'm delighted to introduce Dr S Jaishankar, Minister of External Affairs and joining me in this interaction with the minister is an academic, well-known columnist, eminent foreign policy analyst, and director of Institute of South Asian Studies, National University of Singapore, C Rajamohan. Raja will moderate this session along with me and because we have only 30 minutes with the minister. I'm going to request Raja to keep the questions short and the minister to try and get in as many questions as possible, because he is a man who can say a lot in few words, and I've seen him do that on many occasions. So thank you very much Jaishankar for joining us today and for making the time from your very busy schedule. This is a series of events that we run in partnership with CNBC to address issues of importance to Indian economy, Indians and India's global relations and this is a perfect platform and ideal set of guest for this. Four decades journey of diplomacy, the world has changed. You started off as a career diplomat and now a minister. What did it mean for you, this change, for your relationship with your colleagues? Did this become an easy or a difficult transition?

Dr S Jaishankar: Well, before I come to that, you know, I'll point out one more common point between diplomacy and banking, I think both run very much on trust.

Mr Sunil Kant Munjal: Correct.

Dr S Jaishankar: And, so the capital that you build is very much a function of the trust that you generate and the credibility that accrues from it, but that apart, yes it's been a long journey, but I must say it doesn't feel that long a journey, largely because every day is a new day, the world changes. So, while you may be adding to the experience side of the ledger, the enthusiasm side of the ledger also remains very very strong. I think it's of course a huge advantage to be a minister of a department where you spent all your working life. So, you know, all my colleagues are known to me, the issues are known, but yet as I said, don't get me wrong, it's not that somewhere we have kind of slipped into some kind of routine because the world is today is so challenging, and is challenging largely for three reasons. one the enormous re-balancing over these 40 years, if you look at what are the top 20 economies or the top 10 economies, that's really being transformed in the last two generations. The second, the world so much more globalized world. There is much more interdependence, much more inter penetration. If something happens somewhere, it can be a pandemic, it can be technology, it can be terrorism, so we are far more connected and influenced by each other than we were. And, of course the third is the metrics of influence, or power of diplomacy that has changed. I mean today, we would talk much more of economic parameters of judging influence of technology, or connectivity of different kinds, so it isn't just that the players have changed and the relative weight of players have changed, I would say that the entire landscape has changed.

Mr Sunil Kant Munjal: I would quite agree with you. The maelstrom taking place right now, in geopolitics, is no less than what has happened to the economies in the world. And, while the old cold war is not there, the question being asked is, are we heading towards a new one and pandemic and other such situations absolutely added to that. I am going to hand over to Raja now to comment. Raja.

Mr C Rajamohan: Thank you. Thank you Sunil, and I'll take off from where you stopped just now, cold war. Minister when you joined the Foreign Service almost 40 odd years ago, there were only two big honchos, so we used to call it the bipolar world. Now, what Sunil is saying, we are back to two big honchos, which is US and China. In between of us, US is going to be dominant. So, how is China's emergence as a second most important power, different from the US Soviet War, so how is China making a difference to world, do you see it?

Dr S Jaishankar: Well, you know, first of all, I think there was bipolarity then, not absolute bipolarity. Of course, we were non-aligned even then. And, there is some kind of bipolarity now, but I would still say we are moving towards a multipolar world where all the poles won't be of the same size. I mean, clearly the US and China would be very much more influential than other players, but I would still say, the earlier time was a bipolar world with some incipient multipolar characteristics. This will be a multipolar world with strong bipolar characteristics. For the other big difference of course were, who the poles are. At that time, it was the US and the Soviet Union. We didn't have land borders with either of them. If we are looking at a different era where US and China - One and Two. China is our immediate member. So, the the rise of China has, of course, impacted the entire world very very profoundly, but most of all it would impact its immediate neighbours. So, I won't transpose that old template onto where we are now.

Mr C Rajamohan: You talk about China's rise, Minister. Most countries now seem to believe they underestimated the speed and the scale of China's rise, and its consequences for the world. The USA's look, probably it was a mistake to have got them into the WTO. We have worked with them saying that we can work together on global issues. We have a common interest in making the world multi-polar. But what's happened in the last few weeks, I mean, I think the challenges from China to India have dramatically grown. So didn't we underestimate the scale of China's rise in the early 90s?

Dr S Jaishankar: Well look, to be fair, and I sort of use a, shall I say, yardstick of comparison here. You know, 1988, when Rajiv Gandhi went to China, which was the first Prime Ministerial visit we had from our side after the war in ‘62. The two economies were roughly of the same size. Today, China's economy is about four and a half times, five times the size of India. So, I mind you, it's not like we've stood still, I mean we've grown and we've grown fairly significantly in this period. the fact is that China has posted a very very impressive record over the last 40 years, whether people see that to their advantage or not , in my view we should recognize that reality and certainly give them credit that is due, in that regard. But, we also perhaps need to reflect on, as I said, while we grew, while we grew well by if we were to benchmark ourselves by our own past, if we were to do that in comparison with China, or comparison with Southeast Asia, or some other economies, maybe, there were lot of areas where we could have done very much better. I think, the fact that we didn't intensively industrialize, push manufacturing the way many other Asian economies did. The fact that we opened up very much later, we opened up a full decade and a half after China did, and even when we opened up, whether our commitment to the kind of sweeping reform that we saw in China, not just economic reform, governance reform, administrative reform, social reforms. I mean look at their HR indices, it is significantly better than ours. So, you actually had finally the "Embrace of the World". In many ways, they were much more aggressive about leveraging the world, than we were. So, my own sense is if you look at whether it was developing our domestic capabilities, actually going through with a reform agenda in a kind of 360 way, looking at the world to see how to advance your interest in a very very focused way. The Chinese have scored very very well in all these departments and that to my mind today has created, in a sense, a gap between the two countries and clearly that has implications for the relationship.

Mr C Rajamohan: So seeking the India-China in comparison, I mean, Chinese have grown , the way they think about the world also seems to have changed. While we have grown, do you think that the way our establishment or elite, not just the foreign policy, probably still thinking like in the old ways are not really commensurate with our own size, because after all we are the fifth largest economy, we have the third largest armed forces, fifth largest defence budget, but has our thinking evolved along with our weight?

Dr S Jaishankar: Look, again, my sense is, we are in transition. We are in transition. China too is in transition, I mean it's in much more advanced transition than we are. I'm not sort of necessarily comparing the two. If you ask me, because I start with your first question, so you've been in this building for 40 years, I see a huge change, when I look at the mindsets of people, what our ambitions are today, what our capabilities are, what we are doing. I mean, I just give you an example of - we do development partnership programs with different countries. Now today our reach goes from the Caribbean to the South Pacific. We have out of 54 countries in Africa, we have projects in 51 countries. It would be inconceivable not 40 years ago, even, I would say, perhaps ten years ago. So, it's not that we are not, sort of we are not growing, and we are not becoming more influential, more ambitious, more aspiration. All of that is happening. The issue is eventually a kind of a relative issue, if I grow at 10, but you are growing at 50, then, somewhere that sort of speaks for itself. So for us, the challenges really are today, how do you actually grow faster at home, and not just faster, it's not just a quantitative issue. do you actually do those deep reforms which perhaps we should have done in many cases earlier, Sunil you're from the business world, you would fully agree with me that our manufacturing capability should not be what it is today. I mean it should and could have been very different. You know that we made policy choices and adopted practices that didn't foster industry and I'm just giving your industry as one example. I would give you another, which is, you look at the skills and education levels and health levels. So, there is a lot of work to be done at home. I think, to me, when I look at this comparison, it is a motivation, really, saying how we do better at home and how do we leverage that better outside.

Mr Sunil Kant Munjal: I have a question closer home. When India is looked at by its neighbour, we hear term, very often being used by some of them of, "big brother", "bully", "using your size and weight excessively or unfairly". Do you think there's something we should be doing different to be able to have a smoother relationship, because we do live in a complex neighbourhood?

Dr S Jaishankar: That is true, we live in a complex neighbourhood, not just a complex neighbourhood, a neighbourhood with which we share a lot of history, and we share a lot of sociology. Very often with each one of our neighbours you have communities which are sort of across the border in a way, there are a lot of affinities of various kinds. Now, it is natural for people therefore to worry about how secure they are, especially from a sort of identity point of view. We need to take care of that. But, bear in mind a lot of it is also politics at work, their politics, our politics, sometimes and the interplay of politics. Often, it would be, you know, sharp positioning, which may be sort of magnified by the media. So, we can't wish these things away. I mean, this is politics at work. It's not unique to us. Every region would have its own. Northeast Asia would have its version, Southeast Asia would have its version, America would have its version, and Europe has its version. If you are a big country with neighbours who are smaller than you, there is a natural dynamic out there which would happen. So, here's the answer to my mind. One, we need to create those structural linkages between us and our neighbours, so that they take care of the political cycles and any volatility that their politics may produce. Because, very often people say things about us, where we are actually like a punching bag and a domestic issue which one of our neighbours is having. So, I would say, the sensible thing to do is to make sure that you have strong structural linkages so that you know the politics of the day plays on but the realities of the economics and the social interactions, people-to-people contacts that carry on. Having said that, I would take a lot of care with my neighbours to kind of smoothen and the frictions as they come along. Sometimes you anticipate problems; sometimes it's important that you don't get provoked by what somebody may be doing for a very short term calculation. These are all you know facts of life.

Mr C Rajamohan: For when I take you back to one of the big theme, I mean, what has changed in the last 40 odd years is the expansion of the relationship with the United States. The US on defence, economy, everything when I think it's dramatically changed. But, the critics of your foreign policy say, look you're departing from non-alignment. So many of them measure non-alignment as the distance we keep from the United States. There was a time when we said look, we must stay away from both. But today non-alignment seems to define as how far do you think from the United States? Is that relevant today as we engage with US?

Dr S Jaishankar: Raj, non-alignment was a term of a particular era and a particular, shall I say, geopolitical landscape.

Mr Sunil Kant Munjal: Okay, at a specific context.

Dr S Jaishankar: Either of the context. Now, in a sense there were two aspects to it. One was, be independent. I think that remains very much factor of continuity. We are a big country, we are a old civilization, we have ambitions, aspirations, look at our numbers. And it is natural, there would be a very very strong streak of independence, which is also derives from the fact that we emerged out of a long independence struggle. So, that is the continuity factor. The other factor was particularly in the 50s and 60s when we were very much weaker. A lot of it was, stay out of trouble, don't get entangled, people want to pull you into their issues, which were perhaps, some of it was legitimate at that point of time on those issues. But, look today, people turn to us as part of a solution. We are not necessarily the bystander who may get sucked into other people's issues, but we have a contribution to make. The big issues of the day, increasingly you got to weigh in all of them. Just look right now, I mean, what are the big issues of the day? I would say, what kind of connectivity is a very big issue, maritime security is a big issue, terrorism is a big issue, and climate change is a big issue. You can't say I'm going to stay away and there will be competing choices in all of that. And, my third point would be that if we are to grow and I come back to that India-China comparison we had earlier in the discussion, if we are to grow by leveraging the international situation, then, we’ve got to exploit the opportunities out there. Now, you can't exploit the opportunities by saying I'm going to stay away from it all and by the way when I find it useful I will step out. So, either you're in the game or you are not in the game. So, I would say that era of great caution and a very much greater dependence in a sense on multilateralism, that era is to a certain extent behind us. And we have to step out more, we have to be more confident, we have to articulate our interest better, we need to take risks because without taking risks like in business or in banking, you can't get ahead. So those are choices we have to make and I think there's no getting away from that.

Mr C Rajamohan: See, between neighbours who Sunil talked about and the major powers that I was talking about so far, in between now, we have a new term called the middle powers. Powers were not as big as the US or China, but powers actually. We seem to have discovered the virtues of engaging say France to our West or Japan in the East. I remember when Sunil was in the CII and we did a lot of work on Japan. So you see the importance of these countries has grown in the way you deal with foreign policy today.

Dr S Jaishankar: One they have grown in themselves. You know today, Japan has a much higher international profile than perhaps the time that Sunil and I were working on Japan together. Or an Australia stepping out much more than it was earlier. And , you can say that for different countries and Indonesia, perhaps or Saudi Arabia. But what is also happening is, some of this is a consequence of the, the repositioning of the United States, that if you know that sort of the big umbrella in a sense is either smaller or, shall I say, less thick than it used to be and it's allowed really many other countries to sort of play by much more autonomous rules. In many cases, it doesn't affect us so much because we were never part of an alliance system and we will never be. But, the countries who earlier on were perhaps dependent very much more on American decision making, today are finding that they have to take a call on a whole lot of issues. And on the second part of it is again, we come back to the rise of China. But as you have in a sense a different China and a different America, both for very different reasons. my sense is that much more room has opened up for that what you call the middle powers of different kind. Some of them maybe, countries which have been middle power may be a sort of an understatement, like say Russia, or countries like France, or UK which are in the Security Council, and which still carry a lot of clout. But, again if you look at lot of the G20 players, you would see many of them playing a much greater political role and a lot of regional happenings. Many things are more decided regionally today, than they were 10 years ago. And, a very good example, two good examples would be, North Africa or the Gulf, where things are happening a bit, shall I say, less big power direct involvement than in the past.

Mr C Rajamohan: I had one question I'm sure Sunil will add something to that. If you look at last 30 years, we used to be reluctant supporters of climate change issues. Under your current government, that thing has changed. Today, India is actively championing climate change. But on the other side of the ledger, there was a time when India was actively supporting free trade agreements, but today, we walked away from them, we walked away from RCEP. I'm sure on trade issue, Sunil will have to add something. So how do you look at the way we deal with the world in a multilateral? Sunil you want to ask something on trade side?

Mr Sunil Kant Munjal: I think you asked a very relevant question. I was actually going to expand that a little bit because even I had to work with Jaishankar, one of course with Japan, the other one was also when we worked on the US-India Strategic Dialogue, when we started the civil nuclear program with them, and then again with Pakistan, when we were focusing on the most favoured nation status, and trying to resolve the relationship to a working level point of view. All of these came down to, how do we figure out a way to actually work with them, to do business with them, create investment both sides and that continues to elude us in many of our relationship. What do you think? And because this is the time in India, as you said yourself, want to stand up and be counted, there are unique opportunities that are being thrown out, especially because of China and its positioning and the way the world looks at it with. How do you think India should now at least in the short and medium term position itself to take advantage of the opportunity and our potential?

Dr S Jaishankar: Look, I shouldn't be preaching the virtues of the merits or demerits of free trade agreements. But, let me say that, to my mind FTA has also become a bit of a mantra, as though it's some kind of panacea and by signing FTAs, we are going to get ahead in the world. Just look at the actual record, look at the numbers. The fact is, say with the RCEP countries, if you look at where your trade deficits were 15 years ago and where they are now. You look at the state of manufacturing in this country. I would forget the numbers for a moment, I will just go by a small test. Look at the state of the economy, look at the state of the manufacturing, then look me in the eye and say, yes these FTAs have served me well. You won't be able to do that. Because the fact is, we have actually in the name of globalising, entered into, I mean we can debate the merits, because not all FTAs are the same, I note that point, but the fact is they have not served the country well, the economy well, in terms of building our capacities and I think there are ways of engaging the world which don't necessarily have to be FTA centric.

Mr Sunil Kant Munjal: Let me interrupt. That is the very question by the way. The industry actually has been saying the FTAs are not always good, let's not blindly sign them. If at all, let's do the PTA, which is Preferential Trade Agreement, where you can control and monitor what you open and how much you open or wait in terms of items over a period of time and that has been the big challenge.

Dr S Jaishankar: But I would even say that look there are opportunities today in global value chains that if you actually see what it takes to improve your trade facilitation measures, to attract business into this country, not just as FDI, but as part of a global chain. And this is a part we've actually been quite weak on. So you know, my sense is we really need to look at this space, how to engage the world differently. But, I'll also make a bigger point here; it's not completely dependent on us only. I mean I'm making a case that the FTAs of the past have not served us well, but there are a lot of other people out there in the world, primarily the United States, but not just the United States, who are also thinking, rethinking how they should be approaching the global economy. We are heading to a much more protectionist global economy. I think the Coronavirus pandemic is only going to accelerate those trends. So, some of the some of the answers depend on us, a lot of them depend on other people.

Mr Sunil Kant Munjal: Thank you very much and hope we will be able to get you again, another occasion for one more #MindmineMondays.

Thank you.

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