How India beats China at trade

Over in The Times of India we've a piece talking about how China beats India at trade--the only problem with it is that all the evidence they provide shows that it is India which is winning here. That problem stemming from the fact that the logic used is entirely wrong. Imports are the purpose of trade, imports are why we trade at all. Thus, India gaining more in imports from China is winning, not losing, at trade. That this mistake is common does not excuse it.

Just when India is pushing for solar energy (targeting 100 GW by 2022, 1 GW = 1,000 MW), Vikram Solar is hurting. Last quarter, capacity utilisation stood at half, even after exporting a fourth of its produce. "We are fighting the Beijing factor. Over 80% of India's solar component supplies have been hijacked by the Chinese." he says. Aggressive pricing on the back of state subsidy, a protectionist outlook and cheap finance have allowed Chinese manufacturers to outprice their domestic counterparts. Products of Vikram Solar are 8-10 percent costlier than Chinese imports. India's aggressive solar energy targets would mean business worth over $40 billion for component manufacturers over the next five years.

The point being that we want solar cells in order to be able to produce energy. If we can get those cells 8% cheaper then that's a win for us, we get to produce electricity more cheaply. This is true whether China subsidises manufacture or not. In fact, if it does, then this is a subsidy from Chinese tax payers to Indian electricity consumers--and who doesn't like free money? China is India's largest trading partner, with bilateral trade at $71.5 billion, but it is heavily skewed in favour of China. India imports $61.3 billion worth of Chinese products while it exports just $10.2 billion worth of goods to China. From -$37.2 billion in 2011-12, trade deficit has widened in the last six years to -$51.1 billion.

Exports are the things we have to sweat over so that other people, foreigners, can consume them. Imports are that sweat of foreigners that we get to consume. Who doesn't like to consume the labour of others? Think this through for a moment. Imagine that I live in a fine house. Is this to my benefit or the benefit of the builder? I'm really pretty sure that this benefits me more than him. Equally, if I can and do consume fine food is this more to my benefit than that of the farmer? I'm really pretty sure it is more to my benefit, yes. That India imports more from China than it exports to it is evidence that India is winning at trade--for imports are the very purpose of trade in the first place.