09 December, 2014

The Kerung-Rasuwagadh pass, and what it means for China-Nepal-India relations

A recent article by Sudheer Sharma in the Nepali press noted that unlike the 60s, when Jawaharlal Nehru protested vociferously when Nepal opened the Tatopani trading point with China, there was no protest from India this time around as China starts to build the Kerung-Rasuwagadh pass. This road links Lhasa to Kathmandu, and then via Birjung to India. India, in other words, has matured diplomatically since the days of Nehru. Modi’s vision of a pan South Asian neighborhood prospering together in many ways is the same as Xi Jinping’s vision of an interconnected Asia.

The Chinese have been very interested in the Silk Routes trading route, and in opening up ancient trade routes that used to link different parts of Asia. They want to reach markets that for historical reasons became closed to each other even though they are closer in geographical space. China and India are closer to one another than they are to Europe or the United States--indeed, they share the border in disputed Arunachal Pradesh, which often becomes the fault-line for emotive nationalists from India voicing fears of imminent Chinese invasion. The Chinese, however, have shown time and again that they are interested in peaceful trade. The time may now have come to take up that vision of a pan-Asian continent based on mutual values of peace, co-existence and economic prosperity.

In much the same way as the European Union, we need to figure out a way to share the wealth, and to think of joint ways to trade which benefit both sides. At present, Nepal remains at a disadvantage, tradewise. Although it produces some commodities in great quantities, for instance ginger, this ginger cannot get a fair market price. It ends up being sold for a pittance to Indian businessmen, who then resell it after processing to export markets at a steep price. This trade is neither fair nor beneficial for Nepal’s poor farmers. Kathmandu is too weak to negotiate with New Delhi about trade and tariff restrictions that have kept Nepalese locked-in to the dictates of the Indian market. With the opening up of trade with China, however, there is the possibility of more competitive pricing. In addition, it may be possible for Nepalese farmers to process their own ginger to export quality, once they gain some real income from their produce.

India doesn’t realize that to lose this small advantage-essentially, thinking of the Himalayas as its own private backyard where it grows its almost free Dabur herbs, and where it is now sourcing much of its fruit juice at immensely cheap rates—is holding back its progress. With the opening of the border trade with China, it would have access to a billion plus market. The trade won’t be one-way, of course. India also has a lot to offer, including its world-class educational institutions, its highly trained manpower well versed in English, and its ability to absorb technology like osmosis.

The only thing I do not see the Chinese buying from India and Nepal is sensitive food items like dairy. And the reason is this. I was browsing through the web when I realized the Chinese are now going to Australia to aggressively invest in the dairy industry there. They need about 12 billion litres of milk a year. The baby milk contamination scare has made the Chinese consumer wary of locally produced Chinese baby milk formula. It occurred to me that Nepal is quite near China, and we too have a longstanding tradition of raising cows and milking them for dairy products. In fact, I’d say our Himalayan, free-range, grass-fed cow’s milk tastes far better than Australia’s rather bland ranch-grown milk. So why are the Chinese not coming here? And the answer goes back to sanitation, or the lack thereof, in South Asia. The article I read quotes a Chinese businessman saying: “We found the Australian dairies very clean.” And that’s the crux of what’s holding back Nepal from partaking in a giant market. That despite our capacity to provide the 12 billion liters of milk, we would not be considered a suitable place for baby milk formula production because lets face it, the Nepalese, and the Indians, have a sanitation problem. Without toilets, and basic hygiene, how can the Chinese trust milk that has been produced for their children is healthy, as claimed?

South Asia needs to grow up—both in terms of the realities of the world market, as well as our capacities for trade with neighbors. There is great potential for trade in agriculture, herbal medicines, holistic healing, arts, culture, industrial goods and technology. But so far, Asia has not even touched the tip of this trade, which used to flourish during medieval times.

If we are to become like the European Union—a space where different countries share easy access by ground transport, and where the markets are interlinked, we have to stop fighting about history, and move on with the future. The future says there are 2.5 billion waiting for education, food of good quality, health care, and the basic amenities that make up life. Lets not deny people access to those basic necessities that leads to a good quality of life.

The one drawback of all this enthusiasm about trade, without ensuring the social security of the bulk of the population in a weak state like Nepal, is that there may be an exacerbation of poverty as the wealthy start to monopolize the trade. This was nowhere more evident than in a conversation I had with a herbal medicine maker in Bhaktapur. He told me that black elaichi, a spice essential for certain herbal preparation, had become so expensive he could no longer afford to buy it. The price shot up ten times within the span of a year. Indian businessmen came and bought up all the stock, and then reprocessed it and sent it to export markets. “I've never seen prices rise like this in my life,” he said. If almost every local delicacy ends up in the export market, there is not a whole lot for Nepalese to do other than end up working in the Gulf. Or in India as laborers in slave-like conditions. In other words, unrestricted trade which doesn't give a fair price to farmers, and a fighting shot to local consumers, is worse than no trade at all.

China and India will have to learn that “development” that destroys the water, air and climate is self-destructive. No amount of profit can trade for these. But if done in an environmentally and socially sensitive way, these two countries may be able to do massive trade with each other that would benefit both sides. Nepal, of course, is happy to facilitate this trade.

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