India boycotting Chinese goods is like cutting your nose to spite your face

Published: August 8, 2017
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An Indian minister is calling for a products of Chinese products ahead of the Diwali festival. PHOTO: GETTY

As the standoff between the Indian and Chinese troops in Doklam in Bhutan continues, the clamour to boycott Chinese goods in India is rising. The Rashtriya Swayamsevak Sangh (RSS) has organised a 15-day ‘Boycott Chinese Products’ campaign. 

The RSS mouthpiece, Organiser, says the nationwide campaign is to raise awareness against using Chinese goods. The Swadeshi Jagaran Manch (SJM), an RSS affiliate, claims that the campaign has received huge support. A rally has been planned on October 29th at Delhi’s Ramlila Maidan to conclude the campaign. For some, boycotting Chinese goods is now the ultimate way of proving his or her credentials as a nationalist. And nationalism, with its twisted definition today in India, has come to good use for this government.

Be as it may, the boycott of Chinese goods comes at our own peril; it will cost Indian jobs, cost the Indian industry immensely, and as a result, cost the Indian economy, which increasingly appears to be in the sick bay.

But to those who lead the boycott, for profit or otherwise, and to those who believe in the boycott, a caveat is need here. Boycott of goods in India has special historical significance. We remember the Swadeshi Movement against British goods led by Mahatma Gandhi. It is justified to say in defence of the Gandhi that a colonial economy is structured differently, is extractive in nature, and prevents industrialisation. The economic interactions and transaction of a free country are vastly different.

Nikita Khrushchev buries ‘the world’ and then Soviet Union itself

Forty-two years ago on October 13th, Khrushchev, the then premier of the Soviet Union, when addressing the United Nations, is reported to have famously banged his shoe on the podium and told the world,

“We will bury you.”

Khrushchev’s threat wasn’t a military threat but an economic one. Economic figures of the Soviet Union were indeed spooking Washington and the free world. It was allegedly growing twice as fast as the western world, and almost three times faster than the United States. For economists, this wasn’t outlandish. Wassily Leontief, in his article, ‘The Decline and Rise of the Soviet Economy’ published in Foreign Affairs (January 1960), said “a collectivist, authoritarian state” that directed resources “with determined ruthless skill” would grow faster than any other state. Yet just 20 years later, everything collapsed for the Soviet Union.

How is the collapse of Soviet Russia relevant to boycott of Chinese goods?

Of the many reasons attributed to the collapse of Soviet Russia, Paul Krugman’s has the most logical and apt explanation. Krugman, in his article, The Myth of Asia’s Miracle published in Foreign Affairs (1944), says every country has a finite amount of resources, such as iron ore, capital, technical knowhow and skill sets that it can garner and marshal. The once spectacular growth of Soviet Russia was “based on expansion of inputs” and not because of “growth in output per unit of input”, and therefore, “inevitably subject to diminishing returns”. Explaining the same in simpler terms, Krugman says,

“A man with a bulldozer can dig a ditch faster than one with only a shovel, but he is not more efficient; he just has more capital to work with.”

Chinese goods are cheaper because the average Chinese worker is more productive than say the Indian worker or one in the United States. Boycotting Chinese goods would mean that when we produce the same set of goods using more resources, such as manpower, capital and raw materials.

To cite another example, some days ago, a newspaper report stated that despite worsening relations with a neighbour, Indian suppliers of surgical equipment “eagerly await the next consignments of surgical instruments from across the border”. The reports also states,

“Indian artisans sought to compete with their Pakistani counterparts but eventually gave up. Setting up an industry having this technique will entail substantial cost.”

Boycotting Chinese goods will hurt China, but we should realise that we will get hurt equally bad.

Microchips, not potato chips  

This inevitably leads to the Microchips, not potato chips’ debate of the 90s. Faced with a growing trade imbalance, the clamour to devise federal programmes that would lead to the production of high-value items like microchips against lower value items such as potato chips, found favour in the United States. It is best captured in the exchanges between Lester C Thurow and Krugman. Thurow predicted doomsday unless the United States became more competitive. Krugman rubbished such fears. Nations, Krugman said, don’t compete like firms. Rather, their economic well-being is determined by how productively they engage capital, that is, how much they produce using a certain amount of capital. Nearly three decades have passed since these debates and the US and Japan continue to trade with each other and others quite happily.

The ghost of David Ricardo

Finally, consider this. Till the time we are not marooned on an island like Robinson Crusoe, we find it easier and more rewarding to buy our shirts from the tailor and our shoes from the cobbler. The point being that we don’t make everything we need or use. We trade our skill set and labour to the entrepreneur to produce something, and we get money in return to buy what we need.

A little after Adam Smith wrote ‘The Wealth of Nations’, Ricardo, another classical economist, explained why England and Portugal found it profitable to trade wine for cloth although both countries could make equally good cloth and wine. What nations sell and buy is determined by “comparative advantage”. Despite the world’s progress, the ghost of Ricardo’s “comparative advantage” continues to haunt us and every other nation.

The tragedy of economics

Every man is supposed to be rational and makes rational choices. From the Tulip Mania in the 1600s to the 2008 Subprime Mortgage Crisis, the long history of boom and bust has shown the hypothesis of a “rational man” to be incorrect. Man is emotional and easy to mislead. Often those who mislead do so for profit. For the other half, there is nothing but doom. For instance, the boycott of Chinese goods in India will lead to higher sales of either less effective or more expensive electronic items. During the protectionist regime in India (from the 60s to the 90s), when the tariff barriers were exceptionally high (recall the era of Ambassador cars), we paid for sub-standard products while the manufacturers laughed all the way to the bank.

John Maynard Keynes famously said,

“The ideas of economist and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly supposed.”

The boycott of Chinese goods, or any anybody else’s products for that matter, will only hurt us.

As a nation, we will divert resources, capital and manpower to produce things that we could have bought at a cheaper price from China. As a nation, much like Soviet Russia, we will have lesser resources to develop and will eventually ignore our core area of competence and industry. In effect, it will be like cutting our nose to spite our face.

Boycott Chinese goods, by all means, but at your own peril.

This post originally appeared here.

Sudhi Ranjan Sen

Sudhi Ranjan Sen

The author covers security and diplomatic issues. He tweets as @sudhiranjansen (twitter.com/sudhiranjansen)

The views expressed by the writer and the reader comments do not necessarily reflect the views and policies of The Express Tribune.

  • Kulbhushan Yadav

    Just FYI,
    Chinese good come into India with full assembly and all and are just sold out cold in India. How exactly Indian “industry” be impacted by it? Only people who would face issues are the retailers/vendors selling Chinese good and importers for those goods. They can always sell Indian goods.Recommend

  • Shj

    Pakistanis depending on some cheap Chinese stuff. Nationalism comes first for us Indians.Recommend

  • zoro

    Indians are wise enough to know what to ban and what NOT to ….
    Keep your advice to yourself … as you are trying to insult 1.2 billion people …
    Thank you …Recommend

  • An Indian

    India has lower per capita income and lower labor cost versus China. Boycotting/Banning Chinese goods would invigorate domestic industries in India and give a huge boost to employment. One of the reasons Chinese goods are so cheap as the Chinese government provides huge subsidies to state owned firms. Take the example of steel industry. Cheaper subsidized Chinese steel have decimated Indian steel companies. Higher tariffs or boycott would provide domestic steel firms much needed relief and also boost local employment.Recommend

  • genesys

    There are many products from China that India can do without like cell phones.There are enough and more substitutes and one need not depend on China brands.Similarly a lot options are there in other areas.You may pay little more . India imports more than it exports to China there is net gain for India by bridging the deficit.

    India has been patiently informing China that the dispute can be settled but China is raising the bar and threatening all the time with war and attack and how Superior it is.these are not statesmanlike statements.Recommend

  • Ahmar

    A sane and reasonable article. Despite hostile relations between Pakistan and India there are plenty of Indian goods freely available and sold in Pakistani markets. Boycotting trade for “nationalism/patriotism” rhetoric is very short-sighted. Free trade benefits everyone as more competition leads to lowering prices.Recommend

  • Gratgy

    Has Pakistan given MFN to India?Recommend

  • Gratgy

    “Chinese goods are cheaper because the average Chinese worker is more productive than say the Indian worker or one in the United States. Boycotting Chinese goods would mean that when we produce the same set of goods using more resources, such as manpower, capital and raw materials.”

    What a ridiculous statement. One, the author is making an assumption that the Chinese worker is more productive, that too without taking into consideration the rising costs of labour in China. Using Indian labour and producing products in India, the money will go back into the Indian economy rather than into the Chinese economy. The concept of circular flow of income theory

    It is quite evident that the author is not an economist.The author should stick to his domain and not give lectures about an area which he has no idea about.Recommend

  • Wicknes Sini

    These self-styled experts doing the bidding for the chinese interests should be rounded up & stringent punitive measures taken. The Chinese have gained their proficiency after trial & error for 3 decades. The technical know-how they have acquired through Industrial espionage on massive scales can be replicated by India. It is absolutely rubbish to claim that India would lose massively by banning Chinese goods as the Chinese have been doing the same to the rest of the world even when they lacked the expertise and are doing it today, just that their ban is unstated and disguised through veils of secrecy. Mobilizing the Indian masses against the hegemony of COMMUNIST CHINA & slight handed Pakistan is the wisest thing to do at this conjuctureRecommend

  • Wicknes Sini

    The time is perfect for India to engage with the US & Japan on unprecedented levels. Chinese hegemony is beginning to present a grave threat to the free world and it becomes the obligation of parties with common interests to move their engagement beyond spheres of Defense & Diplomacy to an all encompassing Economic & Social Partnership. Recommend

  • Ahmar

    Has India given MFN to Pakistan?Recommend

  • abhi

    Chinese labour is not more productive but it is cheap due to currency manipulation and Chinese dicatorship (like Soviet Union). Having said that we in India need to be smart in buying things. We should prefer goods made with manual labour (like toys, decorative items, gifts etc.) from India, while the tech items where India doesn’t have manufacturing base could be bought from China. They are subsidising it for us anyway.Recommend

  • MJ

    Great idea. 100% agree with you. Let’s start by producing and selling mass quantities of toilets so that the public does not have to defecate on the streets, parks and beaches. Then India will start competing in manufacturing of VLSI chips, heavy industries etc.Recommend

  • PorkSmasher

    In India’s struggle for Independence the leaders like Gandhi, Lokmanya Tilak etc. called people to boycott British goods, schools and any higher position offered by British to few Indians. The little movement of boycott became so huge in freedom movement that even British realized this and had to offered Indians dominian status, that time Indian industry was in nowhere. Still people managed to live without foreign goods and eventually got freedom from Britain. Anyone who is saying that India will kill it’s own interests is fooling himself and doesn’t really consider common people power. Maybe Indian will be affected but eventually it will pave the road for Indian domestic industry in a long run.Recommend

  • Ranjan rambler

    One of the most stupid articles i have read. seems rahman is getting some commission from the chinese – endless rambling to prove something he started stubbornly with.Recommend

  • kartik

    Another Comedy article.
    Pakistanis will start going Ga-ga now.Recommend

  • Kulbhushan Yadav

    In 1996. Too bad, most Pakistanis are ill informed.Recommend

  • Gratgy

    Yes, more than ten years backRecommend

  • Gratgy

    Great idea! We can even export toilets to Pakistan where 60% don’t have toilets and defecate in the streetsRecommend

  • Ahmar

    I am not obsessed with India. Sue me..Recommend

  • Ahmar

    In that case I don’t see why Pakistan cannot do the same. Personally I have no reservations, but I am guessing the establishment influence within Pakistani politics is the cause of not granting similar status to India.

    Like I have said, free trade is good for all sides and I have no problems if India received a similar trade status that they give us.Recommend

  • Gratgy

    Pakistan cannot do it because of the term”Most Favored” nation, which will lead to the mullahs to froth at their mouths. Neither does Pakistan allow Indian vehicles to transport goods to Afghanistan.
    How can a country like Pakistan give an MFN status to a country that it sees as its duty to oppose.Recommend

  • Sane

    China is a power, not comparable with India in any way. Recommend

  • Sane

    If you talk nationalism, then why you become servants of Arabs. Nationalism as per you can be twisted as and when required to favor you. Like cow if slaughtered by a Muslim, then there is a death penalty for this ‘crime’. When your beef exporting companies slaughter cows, this is legal. What standards you have?!! No standards, no principles, basically.Recommend

  • Sane

    Reality bites. When facts are spoken , that becomes comedy for your disillusioned nation.Recommend

  • Sane

    If Mullahs here then BJP goondas you have. While your goondas are more full of hatred and enemy to humanity. At least ‘Mullahs’ do not have state support as your goondas have support of your govt.Recommend

  • Ahmar

    We don’t see India as a country to oppose. I could say that India sees Pakistan as a country that must fail because of the whole partition thing.

    For the record, I am also totally in favor of allowing Indian exports to Afghanistan and vice versa as well as allowing Iranian gas to be sold to India through Pakistan. I am for trade and Pakistan will also benefit from open trade access.

    Many Pakistanis however oppose it saying that border disputes, such as Kashmir, should be resolved before we do trade with India. Kind of like many Indians are boycotting Chinese goods over their border dispute?Recommend

  • kartik

    Another comedian.Recommend

  • Gratgy

    Indians don’t even care about Pakistan, we don’t compete with you, we are trying to catch up to China. Pakistan appears in the news only when there is a terrorist strike in India. In fact India gave a No objection certificate to Pakistan for applying to the EU GSP plus status on the condition that Pakistan will give MFN status to India in return. However as usual Pakistan backtracked on it . If India wanted you to fail, we could have just cut off your water as you would probably have done if you were in our position

    As far as not opposing India why is your government trying to disguise MFN as NDMA (Non discriminatory Market Access) if people were not opposing the “Most Favoured” tag.

    You being in favour of trade doesn’t really cut it when your mullahs and establishment oppose even the name Most favored to IndiaRecommend

  • Gratgy

    Haha BJP is more disciplined than your own political parties like PPP, PML and PTI. which openly support terrorists like Peoples Aman Committee and LeT. Even TTP’s Hakimullah Mehsud was declared a martyr by your own political parties such as Jamaat-e-Islami . Imran Khan is popularly called Taliban Khan for his support to the Islamic terrorists

    As far as Mullahs not having state support, you are joking right!! UN designated terrorists like Hafiz Sayeed lead Eid rallies in Islamabad. Is it without state support.Recommend

  • Gratgy

    By the way, most Indians are more than happy that the partition happened. It allowed us to build a fence to keep the crazies on your side of the border. In that aspect we owe that to Jinnah.

    Most Indian do not even remember partition since it affected only one or two states. partition may be a major event for Punjabis and Bengalis, but for the rest of India, they just dont careRecommend

  • Salim Alvi

    In 1994.Recommend

  • Salim Alvi

    Pakistan was created by colonial power to oppose and delay India’s freedom. Only Londonabadis were allowed to rule Pakistan. Pakistan gets rewarded for its hate of India and its native culture, language, spirituality and native people’s history.Recommend

  • Salim Alvi

    No BJP person tried to blow up Time Square https://en.m.wikipedia.org/wiki/2010_Times_Square_car_bombing_attempt. No BJP army man killed 3 Million, gang raped 400K women and evicted from their homes 11 Million in 1971. http://www.genocidebangladesh.org No BJP worker killed 120K Baloch and 1 Million Pakhtuns.Recommend

  • Salim Alvi

    India had VLSI foundry in Chandigarh. After opening its economy, there was sabotage and it was burnt. Culprits are obvious… same who made efforts so India doesnt develop cryogenic engine.

    India needs war with China to shake herself up, so that it can get rid of lyches and mosquitos on her body. One bookwale (Das Capita included), wannabe alien Macaulaid BA Hons are sucking India’s blood. Let there be economic freedom as well.Recommend

  • Salim Alvi

    There is nothing communist about China. It is utterly capitalist country with no labor laws or protection.Recommend

  • Ahmar

    All I can say is that the feeling is mutual. India only appears in our news when there is a border escalation or there is a crackdown in Kashmir. Otherwise no one cares. Except for cricket matches or Bollywood movies, India doesn’t even cause a blip on Pakistani Media radar.

    As for stopping water, that is covered in the Indus Basin treaty of 1960 and cutting off water would constitute a declaration of war. If Pakistan were in control of the water, they wouldn’t stop it either… for the exact same reason.

    And again like I have stated before, people in Pakistan are opposed to trade with India for the same reason that people in India are burning/boycotting Chinese goods. Drummed up patriotism and war-frenzy. I maintain that boycotting trade with India will hurt Pakistan as well, just as I stated that boycotting trade with China will hurt India. My position is consistent.

    What is your position? Do you agree with the author? Or are you in favor of boycotting trade with China? If you are FOR banning trade with China, why is it so hard for you to understand the mindset of Pakistanis who are against trading with India?Recommend

  • Salim Alvi

    Anglo Americans & Brishits are traders like Arabs. Their Wallmarts and Amazons push Chinese products. Indians need to boycott these outlets and also the Chinese one called Alibaba.Recommend

  • Ahmar

    There are crazies on both sides of the border. Personally I think it was a loss for the people of the subcontinent to get divided. United, we could have had a bigger voice on world stage, no less powerful than China or the EU. But I digress.

    There are of course many on this side who disagree and are happy that partition happened and they don’t have to live under Indian domination. Oh well.Recommend

  • Gratgy

    Our crazies do not carry assault rifles and grenade launchers, I and most Indians think that partitioned was a good thing that happened and no one is foolish enough to open our borders, that we spent the last decade building, to the bearded crazies that carry around assault rifles and suicide belts. If we were one we would be another syria or Iraq. India is stronger with a fenceRecommend

  • Gratgy

    Declaration of war is just propaganda in your media, Have you followed the Shimla agreement where Pakistan accepted that Kashmir is a bilateral issue. Did we declare war on you when you reneged on it. If we unilaterally declare the treaty is void there is nothing you can do other than send protest letters to the UN.

    There is no question of Pakistan boycotting trade, Pakistan has already boycotted trade with India, it maintains a positive list of around thousand items which it allows the import of. The rest of the Indian goods comes to Pakistan via the grey market or through Dubai. Whereas India has already given you an MFN and does not restrict your products from entering Indian markets

    We hardly export much to the china which does not allow our products such as Pharmaceuticals from entering their market so why should we not return the favor? trade and diplomacy is a two way street.

    I am for banning trade with China because China restricts our products from entering their markets and hence our export deficit is much higher than it should be. What is your excuse?Recommend

  • Ahmar

    Unilaterally declaring the water treaty void would be a concern. But the actual act of stopping water would trigger war. I don’t know why you think Pakistan would sit quietly, doing nothing more than sending protest letters to UN if the water is indeed stopped. Stopping the flow of rivers into Pakistan is akin to launching a nuclear attack on the country.

    As for trade, there are many businesses in Pakistan who are opposed to trade with India for the same reason. They argue that we don’t export much to India and there is no real gain to the MFN status to Pakistan while granting a similar status to India would destroy our local industry and cause a trade deficit.

    I am not aware of the specifics of India-China trade and whether China has barriers to pharma products from India. I will have to look into that and get back to you. I would be surprised if China does indeed put restrictions on Indian imports.Recommend

  • Ahmar

    Well you are entitled to your opinion of course. There isn’t much else I can say. Peace.Recommend

  • Gratgy

    Lol The same deterrence theory that Pakistan trots out that India will not attack Pakistan because it is a nuclear power Moreover considering India has overwhelming conventional superiority and a well established second strike capacity and a much larger geographical area would result in only sending protest letters to the UN. By the way how would you even prove that India is stopping your water. All of your appeals to the the world bank till now has always met with failure.

    India does not have separate tougher quality standards for Pakistani products, they are the same for any country, if your exporters are not able to meet Indian phytosanitary standards then that is not India’s problem. You cannot expect India to give concessions on standards to Pakistani exporters

    As far as you not being able to export to India, I don’t see Pakistan increasing its export to ANY country. Unless you devalue your currency, your items are too costly in any marketRecommend

  • Ahmar

    The water still flows does it not? Like I have said, stopping the rivers would be considered a declaration of war. A war that will end up in mutually assured destruction.

    Now how can I prove that water has not been stopped? The experts and concerned departments in Pakistan would know. I am not an expert on Pakistan’s rivers and irrigation systems but would rely on what they say.

    I laughed at the Pakistan being unable to increase exports to ANY country comment. I have worked at a number of institutes that had IT and financial jobs outsourced from the USA, UK and Canada. The BPO industry is booming and on a rise here with companies popping up all over the place. We are actually quite competitively priced, if we actually set up an outsourcing business.

    Anyways, I don’t see any conversions taking place here. You are free to hold your beliefs and if India completely bans trade with China, then more power to you.Recommend

  • Gratgy

    Water is still flowing because India doesn’t want a failed Afghanistan on its border. As far as exports go, Please go through your export statistics.
    There are hardly any minorities left in Pakistan, in fact one of your channels showed a hindu man converting to Islam.
    During partition you had 40 percent non muslims, now you have less than one percent. If they did not convert, where did they go? Did you eat them??Recommend

  • rationalist

    One aspect of China’s foreign policy is based on subsidizing exports to foreign countries and make their population addicted to cheap imported goods. Once hooked, these countries will become dependent on China, which keeps ramping up huge trade imbalance.

    China is actively following this policy in the US, EU, India and other countries that are geopolitically important to China

    India would be wise to wean itself off from the addiction to cheap Chinese imports if it doesn’t want to surrender its economic, security and geopolitical independence.Recommend

  • rationalist

    Also, China artificially lowers the export goods cost by heavily subsidizing them. A good example: I was able to buy a good LED flashlight to be shipped to the US for $0.85 shipping cost from China included!! How is that even possible without heavy subsidy from the Chinese government?
    Recommend

  • JN9

    Yeah yeah, with this govt implementing GST at 30%, no one needs to give advise or take advise, common sense tells us that Chinese goods are cheaper due to no multiple level taxes, the tax looted by the Hindi govt is use to shove that Iranian origin language Hindi and to fund BJP tours abroad.

    Unless people want to run a charity, its useless to have business running with major expenses shelled out as tax.Recommend

  • zoro

    One wonders why the whole world is trying to invest in India …and the share market is booming … and the FDI is gaining day by day …. hmmmm …
    Chinese goods are cheaper… YES …
    Haven’t you com across the opposite term of ÖRIGINAL” ???
    Well I will rest my case …
    Now i know where you coming from … keep your RED wisdom to yourself …
    My statement stands …. Indians are wise enough to know what is good for them … All the best … You are free to buy Chinese if u wish tho …Recommend