India’s rice ban exposes complex web of global trade and politics

Is India’s multi-alignment policy strategic genius or a missed leadership opportunity?

In global affairs, everything connects. On July 20, India banned exports of non-basmati white rice. This followed Russia’s attacks on Ukrainian grain silos, which, in turn, followed Russia’s repudiation of the U.N.-sponsored grain agreement with Ukraine that permitted the safe export of Ukrainian grains.

India’s move is aimed at keeping its own domestic prices under control and thus avoiding social unrest. But the ban has led to supply shortages and price increases in other countries, including Canada.

It is well known that both Russia and Ukraine, like Canada, are major exporters of grains such as wheat. These exports are vitally important to global nutrition. Less known is that around 40 percent of the world’s rice supplies come from India, putting it far ahead of other major suppliers, Thailand, Vietnam and Pakistan.

That may be surprising in a developing country that has struggled at times to feed itself. Arguably, that struggle has prevented the world’s most populous country from taking its rightful place as a world leader.

There’s a history behind this. India has been, at best, an ambivalent participant in the global trading system. Despite being one of the founding parties of the 1947 Global Agreement of Trade and Tariffs – renamed later as the World Trade Organization – it has resisted the normal negotiated trade-offs on tariff reductions.

On agriculture in particular, it is happy to see tariffs on its exports reduced but remains unwilling to adhere to trade rules, particularly regarding compensation for proven contraventions of WTO rules on import barriers and subsidies. It brought the Doha round to a halt over its insistence on the latter.

Of course, it has its reasons. India is a democracy, the world’s largest. Domestic pressures take precedence over global trade conformity. Like everywhere, the agriculture sector is particularly sensitive. Small farms are part of the social fabric that industrial-scale farming aimed at global competitiveness would threaten.

Attempts in 2020 to pass three agricultural reform bills in parliament without proper consultations led to highly disruptive protests by farmers that lasted an entire year. Roads, rails and ports were blocked. Prime Minister Modi was burned in effigy.

By contrast, for all its shortcomings, undemocratic China now imports over seven times more food than India. While India works to maintain its trade surplus in the sector, China runs an agriculture trade deficit, made easily affordable by its higher value-added exports. In fact, its rise as an economic power hinged on undertaking thorough agricultural reforms. China is now the world’s third-largest destination for food products and Canada’s second-largest market for agri-food products.

India doesn’t just protect its flanks on agriculture. Traditionally known as a leading member of the Non-Aligned Movement, in recent years it has adopted a foreign policy that looks more like ‘multi-alignment’. It participates in the Quadrilateral Security Dialogue (Quad) group of countries with the U.S., Australia and Japan. At the same time, it’s a leading member of the Shanghai Cooperation Organisation, which promotes security co-operation with Russia, China and others. It is also the “I” in the BRICS group of countries with Brazil, Russia, China and South Africa.

It’s a clever strategy for pursuing national interests. India skirts western trade sanctions over the Ukraine invasion and continues to import everything from military supplies to oil from Russia. The U.S. would be reluctant to punish a Quad partner for such transgressions. Multiple memberships also offer diplomatic channels for India to manage ongoing border disputes with China, which have erupted in violent military clashes as recently as 2021.

Unfortunately, multi-alignment has made India more of a serial joiner than a purposeful leader. While that would make sense for a smaller country, it seems odd for the world’s largest democracy with 1.5 billion people. It’s stranger still considering that India has risen to a pivotal place in the Indo-Pacific strategies of virtually every Western nation. The West may have volunteered India as a principal partner, but India seems unclear about whether to accept the nomination.

To be fair, some of the blame for preventing India from realizing its full potential lies in the failure to reform the outdated U.N. system. Not having India as a permanent member of the Security Council may well have valid historical reasons, but it’s archaic today. It’s also worth noting that, as North Americans talk about shifting away from globalized trade in favour of local production and shorter supply lines, we may actually be reverting to policies like India’s that yield worse economic outcomes.

India enjoys a highly advantageous demographic pyramid and a wealth of human resources. It will be devilishly difficult to find the political space to reform its agriculture sector. The rice export ban shows us how fearful the government is of open markets and the potential for unrest.

But, if reform ever succeeds, India would free itself to become a major engine of global growth. This, in turn, would enable it to become not just a serial joiner of clubs but a world leader in its own right.

In the end, everything truly does connect.

By Randolph Mank
and Greg Giokas

Randolph Mank and Greg Giokas are former Canadian ambassadors and business executives. They currently head consulting companies, serve on boards, and are Fellows of the Balsillie School of International Affairs and the Canadian Global Affairs Institute.

Troy Media

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