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Comment (June 13, 2005)

Comment on Anthony D'Costa's Article "Japan and India Need Each Other"

Jeet Khanchandani (University of Southern California)

In a recent article posted on the Glocom Platform website, Professor Anthony D'Costa ( reflected on how Japan and India, two of the three largest economies in Asia, need to develop their bilateral relationships with one another to ensure the improvement of their respective economies in the years to come. In the article, D'Costa brings up several issues that could very possibly lead to hindrances to the growth of both economies. Most notable of these issues were Japan's aging work force and India's narrow scope of export markets (65% of India's IT exports this year were consumed by the United States, while merely 3% was received by Japan).

The first of the problems is indeed a large one. With Japan's population expected to decrease by a lofty three million to 124 million by the year 2015, the Japanese workforce will undoubtedly take a hit in the not-too-distant future. To avoid this problem, clearly the Japanese government needs to not only allow, but also encourage foreign labor to be integrated into the economy, and as D'Costa's article points out, India's younger workforce is quite fitting in this situation. The first step would obviously be to develop a relationship of trust between the two nations. Fortunately, this step has already been taken, as the Japanese Prime Minister Junichiro Koizumi's visit to India implies. Also indicative of this is the fact that the Japanese language is quickly becoming a staple in the Indian education system, a move clearly aimed at breaking down the language barrier that threatens a strong and trustful Japanese-Indian bilateral relationship.

The other issue raised by D'Costa, focusing on the apparent monopoly of the United States on Indian IT exports certainly does pose as an obstacle in the development of Asia as a whole. In diversifying its export markets and particularly concentrating on Japan, Indian engineers can undeniably tap the knowledge of their Japanese counterparts, seeing as Japan is, after all, highly specialized in high-end technological products and arguably more advanced in the field itself than is India.

It is clear that a strong and healthy bilateral relationship between Japan and India could help the steady development of not only these two economies on an individual level, but also Asia in general. However, an important factor in the advancement of Asia that can not be overlooked is China. With a GDP of $1.4 trillion that is expected to grow at a strong 8.1% through 2006, China boasts the second largest GDP in all of Asia. Combined with Japan and India, the first and third largest GDP economies in Asia, their GDPs exceed $6 trillion, which makes up approximately 20% of the world total GDP. It becomes apparent through these figures that China absolutely must figure into the plans for a robust Asian future.

Like Japan, China's workforce is of higher quality than that of India's, albeit it is relatively aged and will eventually be faced with the same demographic problems currently being endured by Japan. Once again, the solution seemingly lies in India, which is expected to have the largest workforce by the year 2020. Evidence of bilateral trade between China and India, Asia's two giants, are already evident. In 2003, the volume of trade between India and China was a disappointingly low $7.6 billion. However, last year that number grew to $13.6 billion, and is expected to grow to $20 billion by the year 2008.

In thinking of the two economies independently, increased trade could potentially turn out to be a hindrance to the development of these two nations, since India would need to import manufactured goods from China while exporting IT services, in turn stifling its own growth by increasing external competition for home workers. However, Professor Christopher Holoman of Hilbert College sees bilateral trade between these two nations as a good thing, as he is quoted as saying: "In the long run it is a good thing. In the long run free markets and free trade tends to raise standards of living for everyone. There will certainly be conflicts. As the two countries grow they may run into conflicts over raw materials and things like that. But I believe actually that the reverse is the case. In the settlement of border disputes you see the fact. The two countries decided that even though they had been fighting over this border over the Himalayan Mountains for decades, in the end that conflict is not as important as the benefits they were enjoying from trading with each other." (Marsha James, "India China Trade". April 19, 2005. <>)

Holoman raises an interesting issue about an increased standard of living in both countries. Due to large populations, both India and China have relatively low GDP per capita, and bilateral trade certainly would render most, if not all, better off. Another fascinating point brought up by Holoman was the fact that both China and India have been able to set aside age-old disputes in the interest of mutual gains from trade. This is indicative of the fact that both nations are aware of the possibilities for the future stemming through a positive bilateral relationship.

Furthermore, China's geographical proximity to both Japan and India are an obvious advantage and provide even greater potential for economic benefits through co-operation. If these three giants were to not only sustain bilateral relationships on a one-on-one basis, but also forge a common trilateral bond with each other, the ramifications could be exceptionally beneficial. One major advantage for Japan, China and India to nurture mutual relations with one another would be the reduced dependency on (and possible exploitation by) current non-Asian superpowers such as the United States. Moreover, with each of these three nations favoring a free trade area with ASEAN (Association of South East Asian Nations), a healthier multilateral relationship among them could certainly bring about the goal of free trade sooner rather than later.

The potential for Asia's three economic giants to not only mold the future of the Asian economy, but also positively affect the entire world economy is undeniably evident. With hard work, dedication and most importantly, co-operation, Japan, China and India can most definitely take the 21st century by storm and set the wheels in motion for a mutually prosperous future. Alas, it is to be seen whether such promise will be converted to anything more in the coming years.

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