Mounting working class and student protests deepen Chile’s political crisis

Cesar Uco

A growing movement of Chilean workers and students against the Socialist Party-led government of President Michelle Bachelet is deepening a political crisis that has engulfed both the ruling New Majority (Nueva Mayoría) coalition and the right-wing opposition, organized in the Alliance for Chile (Alianza por Chile), the two essential political formations that have alternated in power in the quarter century since the end of the dictatorship of Gen. Augusto Pinochet (1973-1990).

Underlying the political crisis is Chile’s sharply deteriorating economic position. Once hailed as the South American capitalist miracle, today the country is facing a sharp decline in most economic sectors, including mining, fishing and agribusiness. Automobile sales, hotel occupancy and other economic indices are also falling rapidly.

The economic crisis, part of the broader collapse of the commodities and emerging market booms that has destabilized “left” bourgeois governments from Argentina to Brazil and Venezuela, is expressed in lower export earnings as well as a shrinking domestic consumer market. The Chilean Central Bank growth figures for this year have been revised downward from 2 per cent to 1.25 per cent, while the official unemployment rate has risen from 5.9 to 6.3 percent in the first quarter of this year.

According to a union spokesperson, 68,000 workers have been laid off in the large mining sector since 2014, i.e., since Bachelet took office. Out of these 21,000 were employed directly by the mining companies and 47,000 by contractors.

As the economy decelerates, layoffs in mining continue. In 2015, 19,000 miners lost their jobs. The ranks of the jobless have swollen to roughly 20 percent of the mining sector, which, according to the figures of the INE (Instituto Nacional de Estadisticas), today employs 244,000 miners.

The British Anglo-American mining company, which operates four mines in Chile, eight in Brazil and one in Colombia, recently announced a workforce reduction from 162,000 in 2013 to 99,000 by 2016, and is expected to further shrink to 50,000 by the end of 2017.

The government-owned mining company, Codelco, the largest copper producing company in the world, set the pace with the the layoff of 4,292 miners late last year.

The loss in domestic consumption is highlighted by a drop of 14 per cent in car sales year-to-year. Total fruit exports have fallen to 2.4 million tons worth US$ 4.2 billion, the lowest figures since 2012.

Last month, an environmental crisis devastated the fishing industry in the southern part of Chile. This came on top of the industry losing a contract with US retail giant Costco to a Norwegian company due to the high use of antibiotics in Chilean farm-raised salmon. This represented a loss of 16 per cent in export dollars for the industry.

The environmental crisis, which has been attributed to “red tide,” a naturally occurring toxic algae that has been intensified by a strong El Niño weather pattern, is also believed to have been aggravated by the salmon industry’s dumping of toxins, including 4,000 tons of dead salmon, into the ocean.

To pressure the government to come up with a decent relief package (it initially offered only 100,000 Chilean pesos, one quarter of what is required by fishermen and their families to survive), the fishermen in the first three weeks of May blockaded Chiloe Island, the largest in the archipelago, that runs one thousand kilometers parallel to Chile’s continental shore. Carabineros (Chile’s militarized national police) used tear gas and water cannon to disperse the striking fishermen.

The fishermen contrasted the US$405 million that President Michelle Bachelet lavished upon the salmon industry during her first presidency in 2008, when it was thrown into crisis by the spread of a virus, to the pittance her government offered them. This was only one of the many illustrations of the fact that the ruling Socialist Party is an instrument of the capitalist ruling class, defending profit interests against the interests of the working class.

Since early May 2016, this has been the growing sentiment driving demonstrations by students and workers over the failure of Bachelet to make good on the promises she made during her 2013 election campaign to alter a social order that makes Chile one of the most socially unequal nations in the world.

In the capital of Santiago, thousands of students demonstrated against the government’s protracted stalling of a proposed education reform that was at the center of Bachelet’s election platform. Over a period of two decades, previous Socialist Party-led governments had failed to change an education system inherited from the Pinochet dictatorship that abolished the previous right to free higher education, imposed tuitions that exclude much of the population, and encouraged the development of private universities to exploit education as a source of profit.

On one of the almost daily student demonstrations on May 27, the authorities denied permission for the march. As result a brutal confrontation ensued, leaving 117 arrested and 31 carabineros wounded. Many people videotaped the events.

In another incident, students belonging to the Asamblea Coordinadora de Estudiantes Secundarios (Aces) burst into the interior of Palacio de La Moneda (government headquarters). Thirty-two students were arrested.

Valparaiso and Valdivia also witnessed clashes between students and carabineros. The government accused the encapuchados (hooded protesters) of being anarchists and having started the violence. But many residents of Valparaiso denounced police, accusing them of infiltrating theencapuchados with the explicit purpose of provoking violence.

Valparaiso’s Mayor Gabriel Aldoney said after visiting La Moneda that the protests were “a cancer that must be removed now.”

The student demonstrations have sharply deepened the crisis of Bachelet’s government. Her approval rating has shrunk to a record low of 24 percent.

Hostility to the president has been fueled in part by the so-called Caval Case, a scandal that surfaced early last year involving her son and former aide, Sebastian Davalos, along with his wife, in alleged fraud and influence-peddling in the pursuit of a multi-million dollar real estate deal.

Bachelet’s unpopularity is exceeded only by that of her rightist opponents. In a poll conducted last August, her New Majority coalition was viewed favorably by only 16 percent, while the Alliance for Chile received only a 15 percent approval rating, meaning that more than two-thirds of the population is hostile to both the “left” and right representatives of the Chilean bourgeoisie.

The crisis has led to a series of cabinet reshuffles. In the latest, Minister of the Interior Jorge Burgos, who had expressed open disagreements with the president, resigned, citing health concerns. His replacement is a fellow Christian Democrat, Mario Fernández Baeza, who as a young man was a member of the Falange and participated in the right-wing demonstrations that preceded the CIA-backed coup that overthrew the government of Salvador Allende in 1973. He is also a leading figure in the ultra-conservative Catholic Opus Dei cult.

Meanwhile, the UDI (Independent Democratic Union) the leading party in the right-wing Alliance for Chile coalition, has been beset by a large number of resignations. Both coalitions have been implicated in illicit campaign financing by business interests, underscoring their equal subservience to capitalist interests.

The working class has been increasingly restive, but held back from a head-on confrontation with the government by the CUT (Central Unica de Trabajadores) union federation, whose leadership is dominated by the Communist Party, which in turn has ministers in the Bachelet government.

The CUT called a protest strike March 31. Its principal concern has been the exclusion by the Tribunal Constitucional of two key points in a proposed labor reform: (i) unions have the exclusive right to negotiate contracts with the bosses, and (ii) extending negotiations to benefits for new members.

The proposed labor reform would give a monopoly on negotiations to the CUT bureaucracy as a reward to its leadership for the CP’s work in diverting and containing the struggles of workers and students, while maintaining its support for the corrupt capitalist administration headed by Bachelet.

Congress, Obama call for a Financial Control Board for Puerto Rico

Rafael Azul

On June 11, US President Barack Obama devoted his weekly Saturday Address to defending House Bill 5278, passed last Thursday, which imposes a seven-member federal fiscal control board over the government of Puerto Rico, supposedly to manage the restructuring of Puerto Rico’s $72 billion government debt.

After making the dubious claim that the US mainland has recovered from the 2007-2008 Great Recession, Obama declared that this is not the case for Puerto Rico:

“Today, the island continues to face a crippling economic crisis. Schools are closing. Power is being cut off at homes and hospitals. Teachers have to choose between turning on the lights and turning on the computers. Doctors can’t get medicine to treat newborns unless they pay in cash. And as the Zika virus threatens both the island and the mainland, workers dealing with mosquito control to help protect women and their unborn babies are at risk of being laid off.”

The grim conditions that President Obama describes are not acts of nature or destiny; they are a direct result of Wall Street’s financial stranglehold over Puerto Rico, which has been shut out of credit markets, and of the refusal of the Obama administration to provide emergency relief funds of a humanitarian nature, even in the face of an accelerating Zika epidemic in Puerto Rico and potentially across the mainland US.

The solution, declared Obama, is “debt restructuring” for Puerto Rico, a code-phrase that in essence means massive austerity measures on the Puerto Rican working class, much like measures imposed on workers and youth in Greece, Detroit, Spain, and across Europe.

The problem, however, according to Obama, is that Puerto Rico does not have the tools with which to “restructure” its debts. The president went on to assure his listeners, fraudulently, that not only will these new measures not cost US taxpayers any money, they would also protect the pensions of 300,000 Puerto Ricans, and safeguard essential services.

The US president also advanced the equally false claim, “This bill also includes something else – a temporary system of oversight to help implement needed reforms and ensure transparency”

In fact, participating in the writing of HB 5278—the “Puerto Rico Oversight, Management and Economic Stability Act” (PROMESA)—were lobbyists for the major Wall Street hedge and vulture funds that own most of Puerto Rico’s debt. The so-called “temporary system of oversight” will be a seven-member fiscal control board. Republican lawmakers will appoint four of its seven members.

Supposedly, the Fiscal Oversight Board will cease operations once Puerto Rico regains its credit standing in world bond markets and balances its budget for four consecutive years. For Puerto Rico such a balanced budget is estimated to require the elimination of 100,000 public jobs and the reduction of government expenditures by 30 percent.

The role of the Fiscal Oversight Board is to impose these draconian measures from the outside, providing a political cover to the local political establishment, the trade unions, and the US government.

Further exposing the deceptive nature of Obama’s Saturday’s assurances, according to HB 5278, the Fiscal Control Board is to meet in secret: so much for “ensuring transparency.”

As written in the law, the Fiscal Control Board imposes a layer of federal authority over all elected officials in Puerto Rico, with the power to erase existing regulations and impose new ones. It will have the last and final word on fiscal policies, and its rulings will extend far beyond “debt restructuring,” to ensure the profits of the financial parasites and big business in Puerto Rico by sacrificing the social conditions and jobs of Puerto Ricans. Choosing his words carefully, Obama assured that he would respect “the democratic rights of the people of Puerto Rico. I am committed to making sure that Puerto Ricans are well-represented in this process.”

Obama is in reality not committing himself to anything that will in any way interfere with the imposition of a financial dictatorship over the island’s economy.

A Wall Street Journal article on the passage of PROMESA acknowledged as much. According to this commentary, the Financial Control Board will be “muscular” and it is based on the Financial Control Board set up for Washington DC in 1995, responsible for the sacking of thousands of municipal workers and draconian reductions in city programs, and attacks on education and other municipal services.

Like the Washington, DC Financial Control Board, its Puerto Rican twin would meet in private and make all-important decisions in secret. The takeover of the Puerto Rican economy by the FCB also means that whatever new borrowing takes place, even to combat the Zika health emergency, requires board approval.

The Wall Street Journal also indicated that by the US Congress passing the bill, and President Obama signing it, a moratorium would then exist that would stall legal action on a $2.1 billion payment default expected to occur this July 1 and allow negotiations to take place. “If negotiations fail, the board could authorize a debt restructuring similar to Chapter 11 bankruptcy that protects creditor priorities. The board’s proposed plan of adjustment would have to be fair and equitable and in the best interest of creditors. So general obligation bondholders couldn’t get shorted to pay pensioners.”

Also included in the new bill is a provision that makes it possible for Puerto Rican authorities to impose a sub-minimum wage of $4.25 per hour on young workers (aged 25 and below). While Obama and the Democrats claim that they do not support that clause in the bill, and had to accept in as an unfortunate compromise, the subminimum wage, points to one more agenda of Wall Street and big business, converting Puerto Rico into a low-wage platform from which to extract more and more surplus value.

This is part of an ongoing attack on working conditions in Puerto Rico. Since 2006, under the governors Aníbal Acevedo Vilá (Popular Progressive Party), Luis Fortuño (Statehood Party) and Alejandro García Padilla (Statehood Party), tens of thousands of public employees have been laid-off. Full time work has been increasingly replaced by contingent labor, while unemployment reached 16 percent.

Against all this, the Puerto Rican union movement reacted to each turn of the screw against jobs and working conditions with protests strikes and empty phrases, designed to disarm popular discontent.

Early on in his administration, García Padilla made clear his contempt for Puerto Rican workers. “We cannot think of lifting Puerto Rico out of the lack of economic growth by lying on the beach. Longer working days are needed to get the nation out of this stagnation,” he declared in 2015, calling for the elimination of holidays, vacation days, and personal time off. He now anticipates that the soon-to-be-appointed Control Board will impose further attacks on jobs and working conditions, which he euphemistically labels “labor reform.”

Puerto Rico confronts its worse economic and fiscal crisis since the 1950s. The public debt of $72 billion cannot be paid, even at an enormous human cost. The commonwealth has no access to capital markets. In the last decade over 400,000 people have migrated away to the US mainland. None of this deters Puerto Rican creditors, who aim to suck out as much as they can, at whatever social cost.

Obama, the US House of Representatives, the US Senate, Wall-Street hedge funds, the Puerto Rican government and legislature, and the trade unions may disagree on this or that aspect of the new legislation. But all accept it as the vehicle to use the debt crisis as an opportunity to reduce working conditions and living standards in Puerto Rico drastically.

All can be counted on to work with the Fiscal Control Board, which requires their support, and against the interests of Puerto Rican workers. The only alternative for the Puerto Rican workers and youth is to reach out to workers in the US, Latin America, and across the globe, in a socialist movement to nationalize the banks under workers’ control and use the wealth of society for human needs.

North Sea oil workers must wage unified struggle

Steve James

Sharp class tensions are emerging in both the British and Norwegian sectors of the North Sea oilfields.

Late last year, 3,000 auxiliary and catering workers providing meals for workers across the UK continental shelf voted narrowly in favour of a strike and 67 percent in favour of industrial action short of a strike in pursuit of a pay claim. This was the first strike vote in the UK sector for decades.

In April, thousands of offshore workers covered by the Offshore Contractors’ Association agreement voted 93.5 percent for a strike in a consultative ballot against pay cuts of between 22 and 30 percent. Another ballot is being held over the next few weeks, following the breakdown of talks. There have been reports of wildcat strikes.

In Norway, long planned talks between union officials and the oil companies, scheduled to last a couple of days, also broke down, this time in a matter of minutes.

The crisis in the North Sea industry is one expression of the global capitalist chaos in oil production. Under conditions of a sharp fall in demand, suppliers, led by Saudi Arabia, increased production—seeking to ruin their rivals. As a result, oil prices have slumped over the last two years to a fraction of their former value of well in excess of $100 a barrel.

Over the last months, Canadian wildfires, political unrest in Venezuela, supply disruption in Nigeria and Libya and a reduction in US shale oil production have temporarily moderated the oversupply. But with Iranian production being ramped up following the end of sanctions against the country, and with record volumes of oil in storage worldwide, there is no near prospect of prices recovering much beyond $50 a barrel.

As a consequence, expensive, deep-water North Sea oil, already in decline as fields become more expensive and technically challenging to exploit, is increasingly unviable. Companies are drastically downsizing, cutting wages, increasing working hours and cutting safety corners, seeking to offload the cost of the slump onto the working class.

Latest figures suggest that out of a total 375,000 in the British sector, 120,000 jobs will have been lost by the end of this year since 2014. Companies shedding workers include Shell, which recently announced 2,200 jobs would go globally, 475 of which would be in its UK and Ireland business. BP announced 7,000 jobs would be lost after reporting losses of $6.5 billion. The Wood Group has announced that up to 1,000 of 6,200 onshore staff are imperilled. In the Norwegian sector, 30,000 of 300,000 jobs have been lost thus far and, as of January, every company was claiming to be losing money. Across the sector, for every one job created, six are currently lost.

Facing a growing determination by oil workers to oppose the assault on their livelihoods, the trade unions are devoting all their efforts to diverting workers, suppressing their struggles and defending the interests of the North Sea industry.

Following the 93.5 percent strike vote at Wood Group in April, the unions launched a sabotage operation. The leading oil industry official for the Rail Maritime and Transport (RMT) union, Jake Molloy, visited four installations in quick succession. He was quoted in Energy Voice as stating, “In the 35 years I’ve been in this industry, I’ve never encountered such low moral or such a demoralised workforce. ... We have a totally disenfranchised workforce that’s getting angrier by the day and that can cost the companies more than anything they are trying to save.”

Molloy’s admission that offshore workers are disenfranchised is a remarkable expression of political bankruptcy. He has for decades been a central figure in the Offshore Industry Liaison Committee (OILC), set up after the 1988 explosion on the Piper Alpha rig that killed 167 workers.

Set up by the trade unions to contain a series of wildcat actions and protests, OILC presented a more militant face to offshore workers for a number of years before being finally merging with the RMT union in 2008. Hailed by the pseudo-left as a revival of trade unionism, OILC’s development as the closest ally of the offshore industry is yet another expression of the collapse of trade unionism as a perspective on which workers can defend their interests.

The British unions are also focusing their efforts on warnings to the Scottish and British governments that the companies are overstepping the mark, while supporting industrial summits aimed at winning tax breaks for the industry. Unite union regional officer, Tommy Campbell, warned a parliamentary committee in May of safety consequences of new work rotas that can mean some workers face 21 consecutive 12-hour days. Stating the obvious, he complained that “there are some changes that are just a step too far.”

Reflecting the same tensions, in Norway, talks organised for late May between the Industry Energy union and the Norwegian Oil and Gas Association over wages for offshore production workers were expected to last two days. The talks swiftly collapsed. Trade union officials were seeking some form of nominal pay increase in return for an agreement similar to ones worked out in other Norwegian export industries. The oil companies rejected any possibility of pay increases no matter what terms accompanied them.

Trade union leaders complained of the employers’ aggression. Leif Sande, of Industry Energy said, “The differences were so obvious so early that is was just as well to make an appointment with the national mediator right away rather than sit here for two days.” Hilde-Marit Rysst, head of the SAFE trade union, warned that the employers’ “demands were unheard of.” Rysst said employers were trying to reduce rights, compensations and cut costs.

To the extent the trade unions have coordinated their efforts against this combined offensive of the employers, it is to promote nationalism and protectionism. In late May, unions from Britain, Norway and Denmark affiliated to the International Transport Workers Federation (ITF) met in Aberdeen to discuss the use of workers from Eastern Europe and from outside the European Union to replace better paid workers.

The ITF promised to oppose “social dumping,” a term which precisely sums up the union bureaucracy’s attitude to the working class. Rather than respond on a progressive basis to the ever more globally mobile and integrated character of the working class to strengthen the struggle against big business, the trade unions promote every conceivable national and regional division, all of which set workers against one another.

Oil workers face immense challenges, but they have immense social strength. Utilising that strength depends on workers freeing themselves from the strangling grip of the trade unions and building rank-and-file organisations of struggle.

However, as was demonstrated by the OILC’s evolution, this must be based upon a new internationalist and socialist perspective. Scandinavian and British North Sea offshore and onshore oil workers have powerful allies. There are ongoing strikes and protests, particularly in France and Belgium, centred on oil refineries, petrol stations and transport. But realising this possibility demands a political break with the trade unions and a conscious orientation towards uniting with workers across the industry in Europe and internationally for the socialist reorganisation of society.

ASPI think tank warns of war with China and attacks on Australia

James Cogan

Three weeks out from the July 2 election, the Australian Strategic Policy Institute (ASPI) has published a research paper titled Agenda for Change 2016: Strategic choices for the next government. ASPI strategists openly advise that the Australian government, during the next three-year term of parliament, will face the possibility that the tensions in the South and East China Seas could draw Australia into a full-scale war with China and result in attacks on the Australian mainland.

Cover of the ASPI report

The document states: “There’s potential that these disputes [in the South and China Seas], especially between the US and China, could spiral into conflict and involve Australia. Australian vessels operating with US forces in the region, as well as US forces stationed in Australia, would be at considerable risk of being attacked.”

ASPI does not spell out how US forces in Australia could come under attack. There is, however, virtually only one conceivable way that the Chinese military could launch attacks on mainland Australia—with intercontinental ballistic missiles or nuclear weapons launched from submarines.

While the most significant US base in Australia, the satellite spying and communications facility at Pine Gap, is located in a remote and thinly-populated part of the country, US naval, Marine and air forces operate from major Australian cities such as Perth, Darwin, Townsville and Brisbane. ASPI has effectively revealed that the US-Australia military alliance and the presence of the US military in those cities have transformed them into targets in a nuclear war.

The strategists and analysts who prepare ASPI reports are fervent defenders of the US-Australia alliance and supporters of American and Australian imperialist operations on a world scale. They are not warning of the prospect of war from the standpoint of opposition, but to insist that the Australian government commit ever greater resources to the armed forces. Even if the provocative US challenges to Chinese territorial claims in the South China Sea do not result in war in the next three years, the ASPI strategists advise the next Australian government that it has to be prepared to join Washington in a range of other military conflicts.

The foreword is authored by Kim “Bomber” Beazley, who was the defence minister in the Hawke Labor government from 1984 to 1990, deputy prime minister during the Keating Labor government from 1992 to 1996 and Labor Party opposition leader from 1996 to 2003 and again in 2005–2006. After leaving parliament, Beazley was appointed as Australian ambassador to the United States, a position from which he only retired last year. Beazley names the Middle East and growing tensions with Russia, as well the US-China tensions in Asia, as potential triggers for Australian military operations.

Leading ASPI analyst Peter Jennings calls for the deployment of more Australian troops to Iraq, even closer integration with the US military and the acquisition of nuclear-powered submarines.

In the key chapter headlined “Defence Policy,” where the warning of attacks on the Australian mainland appears, ASPI analysts advocate providing the US military with even more bases in Australia and insist that Canberra “stump up the cash” to pay for them.

Summing up its forecasts for the next three years, ASPI writes: “The government should prepare for new Australian Defence Force (ADF) operations, ranging from low-intensity but still challenging humanitarian assistance and disaster relief (HADR) tasks in the South Pacific, through significant operational tasks in the Middle East Area of Operations and potential ADF deployments in maritime Southeast Asia— particularly in the South China Sea—that could see them involved in high-intensity military operations alongside coalition partners, to the prospect of a major operation on the Korean Peninsula.”

ASPI places the prospect of conflict and war within the context of the failure of the world economy to recover from the 2008 financial crisis. It notes the ongoing slump in the United States, Europe and Japan and highlights some of the political consequences.

In Europe, the report states, “reactionary politics is making something of a comeback in a haunting echo of what happened in the economic turmoil of the 1920s and 1930s.” In the US, it asserts that “Trump is peddling a truly bizarre brand of belligerent isolationism” in the presidential election and declares there is an “emerging question about the US’s willingness to play the role it has since the 1940s.”

Warning of even greater economic upheaval, which will impact severely on the commodity-export dependent Australian economy, ASPI writes that China is “awash with manufacturing overcapacity, vacant real estate and public works projects for which the costs outweigh the benefits. The risk is that the banking sector will eventually fall into crisis…”

The Australian population has been kept in the dark about the content of the document. Since ASPI published it on June 7, it has not been reported in any of the major newspapers, the commercial television stations or the state-owned Australian Broadcasting Corporation (ABC) and Special Broadcasting Service (SBS). No candidates in the election, except for the candidates of the Socialist Equality Party (SEP), have referred to it.

There is no innocent explanation for the silence in the Australian political and media establishment. By now, it will have been read by senior figures in all the capitalist parties and by leading journalists. They all know that ASPI analysts have warned that there is a “considerable risk” that Australia could be drawn into a catastrophic war, and face attack, most likely with nuclear weapons, because of its alliance with the United States.

The ASPI document is not being mentioned in either the media or the Australian election campaign because the establishment is acutely conscious that mass opposition will emerge once millions of workers and young people begin to recognise the danger of war. It falls to those who are becoming aware to support the SEP’s campaign to break the conspiracy of silence and bring the truth into the light of day.

Gunman massacres 50 in Orlando nightclub

Bill Van Auken

In a monstrous and reactionary act, a heavily armed lone gunman killed 50 people and wounded 53 more early Sunday morning at an LGBT nightclub, the Pulse, in Orlando, Florida. Many of the injured suffered grievous gunshot wounds inflicted by a military-style A-15 assault rifle, raising the strong possibility that the death toll will rise.

Within hours of the incident, the reaction of the media and leading US political figures, including the presumptive Democratic and Republican presidential candidates, made it clear that the mass killings will be fully exploited to promote war abroad and intensified state repression at home.

The gunman, identified as Omar Mateen, 29, a Florida resident, US citizen and son of immigrants from Afghanistan, was himself killed in a firefight with an Orlando police SWAT unit.

At the time of the shooting, the nightclub, which describes itself as “Orlando’s Premier Gay Nightclub,” was packed with over 350 people who had turned out for a Latin music night. The initial list of victims released by police indicated that many of the victims were Hispanic.

According to reports Sunday, Mateen made a 911 call at the time of the attack declaring his allegiance to the Islamic State of Iraq and Syria (ISIS) and mentioning the Boston Marathon bombers. Just hours after the attack, ISIS itself claimed responsibility, declaring that the massacre “was carried out by an Islamic State fighter.” Whatever the truth of this boast, ISIS’ celebration of the cold-blooded murder of 50 innocent people only underscored the thoroughly right-wing character of this organization.

The FBI acknowledged that its agents had interviewed Mateen three times, twice in 2013 in connection with alleged “inflammatory statements” he made to coworkers, and in 2014 in relation to possible ties to Moner Mohammad Abusalha, who grew up in Florida and went to fight for an Islamist militia in the US-backed war for regime-change in Syria, where he detonated a suicide bomb. The FBI said that both investigations concluded that Mateen did not pose a threat and were ended.

US officials expressed skepticism that there existed any substantive links between Mateen and ISIS. The precise character of the killer’s motives remains unclear.

Mateen’s father told the media that his son had voiced strong anti-gay sentiments and had expressed anger at seeing two men kissing in Miami earlier this year. The father, Seddique Mir Mateen, said the family was “in shock, like the whole country,” adding that his son’s actions had “nothing to do with religion.”

Mateen worked for G4S, a private security contractor that serviced government agencies, including providing security personnel for the Department of Homeland Security. As a result, he had firearms and security officer licenses. He lived in Fort Pierce, a Florida city about 120 miles southeast of Orlando, where over one-third of the population subsists below the poverty line and the official unemployment rate is over 16 percent.

What was going on in the mind of Omar Mateen will likely never be known with any certainty. What is clear, however, is that the horrific tragedy in Orlando is only the latest in a series of bloody incidents. The immense social and political contradictions of American capitalist society are taking ever more malignant forms.

Sunday morning’s death toll in Orlando represented the worst mass shooting on US soil since the American Cavalry’s massacre of 150 Lakota at the Pine Ridge Indian Reservation in South Dakota in 1890. It took place, however, in the context of an endless procession of such homicidal outbursts, which have become virtually a daily fact of life in the United States. Since the beginning of 2016, there have been 175 such incidents. Last year there were 372 mass shootings in the US, leaving 475 dead and 1,870 wounded.

Murderous violence at home has developed in parallel with unending wars abroad, with the US military continuously engaged since 2001 in invasions, bombings, drone strikes and “targeted assassinations” that have claimed the lives of over a million people in predominantly Muslim countries. Within the US itself, the most reactionary ideologies have been whipped up to justify discrimination and violence against immigrants in general and Muslims in particular, and to encourage the most backward homophobic sentiments.

The precise confluence of influences that produced the Orlando nightclub massacre may not be known, but that it emerged within an environment shaped by increasing social dislocation, war and political reaction is undeniable.

President Barack Obama made a typically empty speech from the White House on Sunday, declaring the mass killing “an act of terror and an act of hate.” Obama, who recently authorized an escalation of the nearly 15-year-old US war in Afghanistan while simultaneously overseeing US military interventions in Iraq, Syria, Libya, Yemen, Somalia and elsewhere on the African continent, vowed that “we will stand united, as Americans, to protect our people and defend our nation, and to take action against those who threaten us.”

Hillary Clinton, Obama’s former secretary of state and the presumptive Democratic presidential candidate, was even more explicit in exploiting the tragedy in Orlando to promote US militarism abroad and an escalation of attacks on democratic rights within the US itself. “For now, we can say for certain that we need to redouble our efforts to defend our country from threats at home and abroad,” she said. “That means defeating international terror groups, working with allies and partners to go after them wherever they are, countering their attempts to recruit people here and everywhere, and hardening our defenses at home.”

Her Republican rival, Donald Trump, pursued a slightly different tack, utilizing the Orlando massacre to bolster his promotion of anti-Muslim and anti-immigrant bigotry. He initially tweeted that if Obama failed to attribute the killings to “radical Islamic terrorism” he “should immediately resign in disgrace,” and that if Clinton failed to use the same words she should withdraw from the election.

“Because our leaders are weak, I said this was going to happen—and it is only going to get worse,” he said later in the day. “I am trying to save lives and prevent the next terrorist attack. We can't afford to be politically correct anymore.”

These reactionary appeals are a warning of what is being prepared, no matter which party wins the 2016 presidential election. The aim of both the Democrats and Republicans is to intimidate, frighten and disorient the American people with the specter of terrorism in order to distract attention from the social crisis, shift the political debate to the right and prepare for both new wars and intensified attacks on the rights and conditions of the working class.

Race, gender and the US presidential campaign

Patrick Martin

The US presidential election campaign has reached a new stage with the clinching of the Democratic and Republican presidential nominations by former Secretary of State Hillary Clinton and billionaire real estate developer Donald Trump. Not only the identity of the nominees, but the political posture of the two campaigns has clearly emerged.

Up to this point, the most significant element of the election campaign has been the manifestation of deep popular opposition to social inequality and growing anti-capitalist sentiment. This took the form of support for Bernie Sanders, who describes himself a “democratic socialist” and based his campaign on denunciations of the “billionaire class” and calls for a “political revolution.” The major driving force of this political radicalization is the impact of the 2008 economic crash, which has been followed by a restructuring of class relations with devastating consequences for the lives of millions of people.

The ruling class, and, in particular, the Democratic Party establishment, is far less concerned about the rise of Donald Trump than it is about the broad support for Sanders, which created a political crisis for Clinton and seriously jeopardized her planned coronation. The surge in support for Sanders came as a frightening shock to the entire political establishment—including Sanders himself—and the corporate-controlled media, because it demonstrated the emergence of a mass constituency for anti-capitalist, socialistic ideas.

There is a broad consensus, across both parties, that the class issues raised by the Sanders campaign in the primaries must be buried in the general election campaign. The decision has been taken at the highest levels of the political establishment to direct attention to issues of race and gender—including deliberately provoking such issues—in order to distract the public from the more fundamental economic division in society. This will be combined with an extremely right-wing campaign by the Democrats aimed at winning support from sections of the Republican Party on the grounds that Clinton, with her close links to both Wall Street and the military-intelligence establishment, is the most competent and reliable figure for waging war abroad and deepening the attack on the working class at home.

Clinton set the tone in her victory speech last Tuesday night, preceded by a campaign video that presented her candidacy as the culmination of a struggle for women’s rights extending over nearly two centuries and going back to the first stirrings of support for women’s suffrage.

Bernie Sanders added his voice during a day of meetings Thursday with Obama, Vice President Biden and Senate Democratic leaders. Speaking to the press outside the White House, he made clear that he was planning on working closely with Clinton, as he had pledged to do at the outset of his campaign. He denounced Donald Trump, declaring, “It is unbelievable to me, and I say this with all sincerity, that the Republican Party would have a candidate for president who in the year 2016 makes bigotry and discrimination the cornerstone of his campaign.”

It was noticeable that Sanders did not describe Trump as a billionaire, or link his opposition to Trump to his own year-long campaign against the domination of “millionaires and billionaires” over US politics. He referred exclusively to Trump’s bigoted attacks on Mexican immigrants, Muslims, women and other groups defined by religion, race, language or gender, not economic class.

The extraordinary intervention by Vice President Joe Biden into the controversy over a Stanford University sexual assault case is part of this effort to promote identity politics as the central issue in the 2016 campaign. Last week, Biden lent his support to a campaign led by a Stanford professor to recall the judge who presided over the sexual assault trial and conviction of a university freshman, on the grounds that the judge’s sentence was too lenient.

There is no basis for the federal government to intervene into what is a local criminal matter. Biden has shown no such solicitude for the victims of the lead poisoning of the water supply in Flint, Michigan or the countless victims of US police killings, to say nothing of those bombed, incinerated or turned into homeless refugees by US military violence in the Middle East.

Biden, acting in behalf of the Democratic Party establishment, calculates that with the imminent demise of the Sanders campaign, which drew wide support from college youth, a new basis must be created for drawing students around the Democrats and the presidential campaign of Clinton, who is widely despised as a corrupt personification of the political status quo. Hence the calculated effort to promote right-wing agitation tied to issues of gender identity.

The most unabashed argument for the primacy of race and gender over class issues comes from New York Times commentator Paul Krugman, who throughout the election campaign has used his column to promote Clinton and heap scorn on supporters of Sanders. In a piece published Saturday under the headline “Hillary and the Horizontals,” Krugman defines as “horizontal inequality” differences between social groupings based on race, gender, etc., as opposed to class inequality (which he refers to as “individual inequality”), measured by economic position or income. He declares, “like it or not, horizontal inequality, racial inequality above all, will define the general election.”

Krugman describes the campaign by Sanders against economic inequality as “a pipe dream” because it ignores the fact—in Krugman’s view—that the working class in the United States is irretrievably divided by race. “Defining oneself at least in part by membership in a [racial or ethnic] group is part of human nature,” he claims. By his account, the Republican Party has long sustained itself by “getting working class whites to think of themselves as a group under siege, and to see government programs as giveaways to Those People.”

The Times columnist ignores the fact that support for Sanders is itself a refutation of this slanderous characterization of the working class. He also ignores the drastic shift to the right of the Democratic Party, which has long abandoned the reformist liberal program that prevailed from the 1930s to the 1960s based on limited concessions to the working class, in favor of various forms of identity politics benefiting sections of the upper-middle class.

Krugman has functioned as an apologist for the economic policies of the Obama administration, presenting its health care program as a progressive reform on a par with the New Deal and the Great Society, rather than an effort to shift medical costs from corporations to workers. He deliberately conceals the principal basis for Trump’s appeal to working people: the Obama administration’s role as the spearhead for big business in destroying jobs, wages and living standards.

Instead, he claims, the 2016 campaign “is going to be mostly an election about identity.” He continues: “The Republican nominee represents little more than the rage of white men over a changing nation. And he’ll be facing a woman—yes, gender is another important dimension in this story—who owes her nomination to the very groups his base hates and fears.”

Trump is polling at 43 percent of the vote. To suggest that this is a measure of “the rage of white men” is a political libel of the working class, to say nothing of a mathematical absurdity. The truth is that working people instinctively, and for good reason, regard both Trump and Clinton with distaste. These are the two most unpopular politicians ever to contest the presidency. It is a measure of the isolation and bankruptcy of the US financial aristocracy that such is the “choice” its political system offers to the American people.

Implications of Modi’s US Visit

Chintamani Mahapatra


Indian Prime Minister Narendra Modi’s fourth visit to the US and second meeting with US President Barack Obama at the White House had not raised heightened expectations, and thus, the outcome of his visit also failed to generate much excitement in either India or the US.

The main event that drew the attention of the Indian media was his address to the joint session of the US Congress. It is difficult to extract any aspect of his speech or statements to highlight any newness in the emphasis or novel initiative. What accounts for little anticipations from Modi’s recent visit to the US and tiny excitement over the outcome after his visit?

Firstly, Prime Minister Modi has already met the US president multiple times and it was to be yet another round of interactions. Secondly, his first visit to the US after assuming office as the Indian prime minister was already spectacular both in terms of optics and substance. And nothing more could have been expected in just about two years. Thirdly, his initiative to invite President Obama to be the Chief Guest at the Republic Day celebration also indicated both his innovative diplomacy and coherent efforts to effect a deeper cooperation between the US and India.

All that needed to be said had already been said in last two years and this time the visit perhaps meant to reinforce the mutual commitment to implement the measures agreed upon. Many believed that it was not prudent to visit the US to speak with an outgoing president and especially at a time when that nation was acutely engrossed in an election year. But such an argument is fallacious. Regular interactions at the highest levels of government undoubtedly have value-addition; and especially since the two countries have begun a journey along a new trajectory in their bilateral relationship in the midst of a difficult transition in the global political economy and subtle power shift. Moreover, Modi did not yet have an opportunity to directly engage with a powerful component of the US federal government, whereas President Obama had addressed the Indian parliament during one of his visits. That gap has been desirably filled with this visit.

The principal question that needs to be examined is whether Modi’s recent visit would have any substantial impact on the US’ policy towards South Asia. What were the major points raised by the Indian prime minister during his recent visit to the US? First, he expressed his desire to elevate the level of economic and technological cooperation between the two countries. India’s economic performance in the backdrop of a slow recovery of the global economy from recession, and the Modi government’s ambitious economic agendas to develop India’s infrastructure to fit the 21st Century global standard; create one hundred smart cities; and improve rural-urban connectivity through digitisation; certainly provide a great opportunity to expand Indo-US economic cooperation.

Secondly, Prime Minister Modi reiterated his idea of more robust Indo-US cooperation to fight global terror whose incubation takes place in India’s neighbourhood. Here, one may say that the two countries have been making some combined efforts to combat terrorism for long, but the nature of engagement between Washington and Islamabad has and will continue to set the limits. So long as the US forces are present on the Afghan soil, Pakistan will remain a relevant security partner of Washington’s. No matter, who enters the White House after the upcoming November election, expecting more than what already is the level of cooperation between New Delhi and Washington would be like building castles in the air. Pakistan seems to be a necessary evil that no US government can close its eye on.

While the US apparently is seeking closer security ties with India in the emerging context of escalating challenges from enlargement of the Chinese sphere of influence in South and Central Asia, it remains to be seen how India and the US actually collaborate extensively in the economic sphere. China’s economic footprint in Pakistan has been enlarging and the promised implementation of Sino-Pakistan economic corridor will further strengthen Beijing’s influence in South Asia. This in combination with Chinese economic presence in other smaller countries in South Asia do pose a long term security risk to the US’ influence in this region. Unless the US considers this aspect and seeks to enhance its economic involvement in this region, its single-minded effort to forge defence and security partnership with India will be inadequate to maintain a regional balance.

The Indo-US strategic partnership at present seems heavily loaded in favour of defence and security ties. There is no need for course correction, but greater economic and technological focus is necessary to make it more balanced. Modi’s reemphasis in the US on enhanced economic cooperation is thus a welcome development.

Iran, India and Chabahar: Recalling the Broader Context

Ranjit Gupta

Indian Prime Minister Narendra Modi’s visit to Iran has generated huge euphoria around the country and reams of adulatory commentary. While it is worthy of applause, this author also sombrely recalls that few weeks ago, an Iranian had in a conversation, said, ‘India voted against us; particularly ardently courts the US; accords priority to Israel; cosies up to UAE and Saudi Arabia – all those who hate Iran passionately; owes us almost $ 6.5 billion for imported oil; had done nothing in Chabahar since an agreement was signed in 2003; how is a meaningful relationship possible?'

The person in question has since conceded that it was a great visit and an excellent outcome but suggested postponing celebrations for a year to see how things pan out on the ground.

After the uneasy Khomeini era relationship, despite India establishing full diplomatic relations with Israel in January 1992 and the Babri Majid being demolished in December 1992, Iran received then Indian Prime Minister Narasimha Rao in September 1993 with great cordiality. In a particularly significant gesture, in 1994, Iran prevented a Western-backed OIC initiated resolution against India in the Human Rights Council from being considered. The then Iranian President Akbar Hashemi Rafsanjani paid a return visit in 1995. Both countries cooperated strongly in trying to prevent Pakistan from succeeding in installing the Taliban regime in Afghanistan by providing military assistance to the Northern Alliance. Iran invited India to the Teheran Conference on Afghanistan in October 1996 in spite of Pakistan’s strong objection and threat to abstain from the conference that it ultimately did.

In 2000, an agreement was signed creating a mechanism for seamless transport between India and Eurasia through an International North-South Transport Corridor, of which Iran was the centrepiece. The then Indian Prime Minister Vajpayee visited Iran in 2001; In January 2003, India, Iran and Afghanistan signed an agreement for joint development of transportation links to Afghanistan from Chabahar in Iran where India would develop the port. In 2003, the then Iranian President Mohammad Khatami visited New Delhi where he was also the chief guest at India’s Republic Day function. The two countries signed the historic ‘New Delhi Declaration’ establishing a visionary multi-dimensional ‘Strategic Partnership’ between the two countries. Iran was the second-largest supplier of oil to India.

This was the golden decade of Indo-Iranian relations.

Thereafter, this blossoming relationship plunged dramatically. With the accidental discovery of Iran’s clandestine potential nuclear weapons programme in 2003, the then US President George W. Bush denounced Iran, terming it a part of an ‘axis of evil’ and imposed ever increasing sanctions to strangulate Iran’s economy. India had been under intense US-led high technology international sanctions since 1974.

Despite India’s nuclear tests in 1998, then fiercely denounced by the US, the friendliest US president towards India, Bush, offered ending of that sanctions regime and a civilian nuclear deal, also ending India’s international nuclear isolation. This understandably became India’s preeminent foreign policy priority and inexorably led to India’s negative vote against Iran in the IAEA Governing Council in September 2006 at a time when the agreement with India was at a particularly critical phase of legislative consideration in the US. Iran was absolutely shell shocked; the wound will take time to heal. More than the vote itself, the complete unexpectedness of it hurt enormously; India should have sent its foreign minister to Iran the day before the vote to give advance intimation and explanation. India had to abide by international sanctions, and inevitably, India’s oil imports from Iran suffered – it dropped from the second to the seventh rank. In today’s complexly interconnected world, bilateral relations are subject to unexpected buffeting by extraneous factors. In the case of Iran, this possibility has been particularly salient, and remains so even today.

West Asia was almost completely absent from the Modi government’s foreign policy priorities during its first year in office except for a clear emphasis on significantly elevating the relationship with Israel – certainly overdue. Very understandably, relations with immediate neighbours, elevating ties with the US and Japan, and managing the very difficult relationship with China, were priorities. With West Asian Muslim countries deeply embroiled in the region’s worst ever sectarian wars and conflicts, it was felt that it is better to steer clear from engagement with them at that time. Those priorities attended to, Modi visited UAE in August 2015 and Saudi Arabia in early April 2016. It was far easier to make a beginning with them since relations were already very good.

After the Iranian nuclear deal with the West and easing of sanctions against it, opportunities with Iran opened anew. Unlike with the Gulf Cooperation Council (GCC) countries, a strategically significant Indo-Iranian relationship hinges fundamentally around the Pakistan-Afghanistan factor.

India quickly executing projects – Chabahar port development, roads and railways construction, infrastructure for commercial gas exploration etc. – in Iran impinging on that factor is of the essence Barring Afghanistan, India’s record on agreements/project implementation abroad has been dismal.

Therefore, Modi’s visit to Iran required extensive preparatory work; in the past year, several ministerial visits – External Affairs, Shipping and Transport, Petroleum, and of very senior officials – the NSA, the foreign secretary, senior officials of finance and other relevant ministries and PSUs – took place.

The result is that of the 12 MoUs signed, 5 concerned Chabahar Port and related projects; these MoUs and the very long paragraph 6 of the joint statement, which also covered potential Indian development of the Farzad B gas field, spell out India’s monetary commitments, executing entities, deadlines, etc. Payment of USD 1.25 billion of the outstanding amount was made on the eve of the visit and India has committed to clearing the remainder soon. If all this happens in the envisaged time-frame, then Prime Minister Modi’s May 22-23 2016 visit to Iran, the first bilateral visit by an Indian Prime Minister 15 years, will be regarded as a truly historic, strategic game changing one.

The 23 May 2016 signing of the Trilateral Agreement on Establishing Chabahar Transport and Transit Corridors in the presence of Iranian President Hassan Rouhani, Afghan President Ashraf Ghani and Indian Prime Minister Modi deserves special mention. Ghani said, “Hundred years from now historians will remember this day as the start of (true) regional cooperation. We wanted to prove that geography was not our destiny. With our will we can change geography.” Rouhani said, “Today is an important and historical day of development of relations between the three countries…From Tehran, New Delhi and Kabul, this is a crucial message ... that the path to progress for regional countries goes through joint cooperation and utilising regional opportunities.” Modi said, “We have also agreed to enhance interaction between our defence and security institutions on regional and maritime security.” This was rounded off by Prime Minister Modi and President Ashraf Ghani jointly inaugurating the Salma Dam near Herat, Afghanistan, on 04 June 2016.

All this gives India greater space to be a proactive player in the Pakistan-Iran-Afghanistan region. However, some adroit diplomacy will be needed because in sharp contrast to the past, both Iran and Russia have developed working relationships with the Taliban. India is the only regional player with no contact with the Taliban.

Migration Issue in Assam: Going Beyond The Rhetoric

Wasbir Hussain

On 24 May 2016, the day he took oath as the new chief minister of the Bharatiya Janata Party (BJP)-led coalition in Assam, Sarbananda Sonowal said, “Our government will strive to make a illegal migrant-free and corruption-free State.” This pledge – made in the presence of Indian Prime Minister Narendra Modi and almost the entire BJP top-brass including party President Amit Shah who were present during the swearing in ceremony – only reinforced the importance and priority the BJP has lent to the issue of illegal Bangladeshi migration to Assam and elsewhere in the country.

Throughout the campaign period, the BJP harped on the migration issue. In fact, the party described the Assam election as the ‘last battle of Saraighat’. Fought in 1671, the much weaker local Ahom army defeated the Mughals on the banks of the Brahmaputra River near Guwahati. The Ahom victory in that battle halted Mughal expansionism into Assam. The BJP’s explanation was that if the party did not win the polls, Assam would come to be ruled by people who may not be of Indian origin – implying that it could be governed by the Congress-AIUDF (All India United Democratic Front headed by Maulana Badruddin Ajmal) combine who, BJP leaders said, might win with the votes of alleged ‘Bangladeshis.’ The campaign worked and the BJP and its allies received a huge mandate – 86 seats in the 126-member state assembly.

The question now facing the BJP and the Sonowal government is plain and simple – can one expect steps beyond rhetoric to actually deport those people who have been or who would come to be declared as illegal migrants by the due Indian legal process? After all, New Delhi must first be able to make Bangladesh agree that such a problem – that of its nationals migrating illegally to states like Assam – actually exists. After all, unless Dhaka recognises the problem, the question of Bangladesh taking back its nationals declared as illegal migrants by the Indian legal system does not arise. Of course, one must record the fact that India-Bangladesh relations have reached a new high under Prime Minister Modi and, therefore, New Delhi is expected to make Dhaka agree to reach a deal on taking back its nationals declared in India as illegal migrants.

The first visit Sonowal made as chief minister was to the headquarters of the state agency that is involved in the process of preparing an updated National Register of Citizens (NRC). This visit was symbolic, because a correct and updated NRC is expected to determine the Indian nationals among the residents of Assam. This means those whose names do not figure in the final NRC can be considered as people of doubtful citizenship. Sonowal has also assured providing full logistical support to the tribunals set up by the government to go into cases to determine the nationality of those whose citizenships are considered doubtful.

There is no doubt that there are illegal migrants in Assam, but achieving the ultimate objective – that of freeing the state of illegal migrants – can be extremely difficult. First, there is a lack of clarity on the issue itself because all persons who have migrated are loosely labelled as illegal migrants irrespective of the date of their entry into India. In Assam, there can be several categories of migrants who could claim a legal status. Take a look at the following categories as provided for in the Assam Accord that had set 25 March 1971 as the cut-off date:

a. Persons who came before 1 January 1966 will be entitled to Indian citizenship

b.    Persons who came between 1 January 1966 and 24 March 1971 are entitled to grant of citizenship after a lapse of 10 years

c. Persons born on Indian soil between 24 March 1971 and before 1 July 1987 are entitled to claim citizenship by birth

d. Persons born on Indian soil after 1 July 1987 but before the commencement of the Citizenship Act, 2003, are entitled to citizenship if one of the parent is an Indian national and the other is not an illegal migrant at the time of his/her birth.

The BJP government in Assam will have to begin with two things now – press the Centre to enter into a dialogue with Bangladesh on the issue and to halt fresh influx. The BJP has promised in its election vision document that it would ‘seal’ the border and stop fresh infiltration of people from Bangladesh. Now, Union Home Minister Rajnath Singh has announced the border will be ‘sealed.’

This has been repeatedly said for the past 30 years and people have come to be cynical on such assurances. To actually halt further infiltration, certain other measures like a second line of defence along the border by settling ex-serviceman and things like that will be necessary. However, theoretically speaking, ‘sealing’ the border and halting fresh influx is possible.

Assuming that fresh infiltration is stopped, how is the new government in Assam going to look at or deal with the issue of Bangladeshi migration? Are people going to bracket every Bengali-speaking Muslim settler who lives in the Char or riverine areas as ‘Bangladeshi’? The Sonowal government will have to address this issue and try to resolve it once and for all. The new government must make a clear distinction between Muslim settlers who are Indian nationals by virtue of the provisions of the Assam Accord as well as other Constitutional provisions, like nationality by birth, and those whose citizenship are doubtful in nature.

Once this distinction is made, the new government must draw up a roadmap to provide education, healthcare, connectivity and power to the areas where the settlers are concentrated. If the sense of deprivation among these people continues, they may fall prey to anti-India forces who may try to exploit their vulnerability. Assam can do without a new security situation, nor does the state want social tensions with a new dimension.

Changing Regional Contours and Imperatives for India

Amita Batra

That the centre of gravity of the global economy has shifted to Asia over the last decade and a half is known and accepted. China, India and some emerging market economies from Southeast/East Asia contributed significantly to this shift. Over the same period, global trade led by production fragmentation across borders increased manifold. China emerged as a systematically important trading hub in this network-led trade pattern and a major trading partner for most countries including India.

However, in the period since 2008, that is post the global financial crisis, it appears that this growth and trade pattern may yet be undergoing another shift. Recovery in the advanced economies that remains weak, uneven and uncertain is coupled with the slowdown and rebalancing of the Chinese economy. Constrained thus by sluggish traditional markets and trade impulses, developing countries have had to look inwards and strengthen regional inter-linkages. In Asia, this is evident in the accelerated pace of creation of the ASEAN economic community (AEC) as also through the formulation of mega regional trade arrangements. Explored below are these changing regional economic contours and in the context, the imperatives for India.

China’s Slowdown and Growth Reorientation

Post the global financial crisis, as China rebalances towards a lower trade surplus and a new growth strategy with increased emphasis on domestic consumption, services and innovation, the spillover effects of excess capacity created in some sectors under the earlier investment-led growth model continue to impinge on its economic outcomes. In recent years the Chinese economy has slowed down, registering a modest growth of 6-7 per cent relative to its pre-crisis double digit rates of growth. This may not augur well for Asian economies tied to Chinese export demand through supply chain linkages. In addition, the ad hoc depreciation of the renminbi between August 2015 and January 2016 without corresponding capital account liberalisation and financial sector reforms has led to confusion among investors and transmission of volatility through closely interlinked trade channels in the region.

The AEC

The ASEAN economic community is fast moving towards its objective of creating a single market and production base that is globally competitive. Liberalisation of trade in goods through reduced tariffs has been largely accomplished. Movement of intermediate goods across borders and strengthening of regional value chains is thereby further facilitated. While the final formation of the AEC will depend on the pace of progress of the remaining agenda of services and investment liberalisation, the existing integration levels and continued economic dynamism of some ASEAN economies are expected to generate positive growth impulses for the region.

Mega Regional Trade Arrangements

Global trade rules are in the process of being rewritten primarily by mega regional trade arrangements with provisions that go well beyond liberalisation of goods and services trade and investment. Of the three mega regional trade agreements signed or under negotiation namely the Trans Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP) and Regional Comprehensive Economic Partnership (RCEP), Asian economies are members of the RCEP and TPP. TPP with negotiations complete and trade deal signed awaits parliamentary ratification by individual member countries. While sceptics have expressed doubts as regards the US post election scenario, it would be difficult for any member country to forego the potential benefits of not just the TPP, but through it, of the US-EU TTIP as well.

Some of the TPP member economies are also members of the RCEP. RCEP is relatively less ambitious than the TPP. It is initially focused on trade and investment liberalisation even though it mentions intellectual property, competition policy and other regulatory measures. Like the TPP, the RCEP through reduced tariffs and preferential access will also be facilitating greater movement of intermediate goods across borders and hence value chain integration in the region. Overlapping membership of the RCEP with the TPP will imply spillover advantages, subject to rules of origin (RoOs), in terms of preferential access to markets as well as make inevitable increased exposure to competition for all members of the agreements.

Imperatives for India

India’s ‘make in India’ push to its manufacturing sector has to factor in these regional realities. Presently, India’s linkages with the regional value chains are marginal. Earlier free trade agreements (FTAs) at the bilateral and regional level with the ASEAN and East Asian economies have resulted in limited economic gains for India. Among the mega regional trade agreements, India is a member of only the RCEP. India’s offers for tariff liberalisation at the RCEP are not just the lowest among all members but also differentiated for its FTA and non-FTA partners. India through its participation in bilateral FTAs, RCEP and owing to overlapping RCEP-TPP membership will eventually be open to preferential access by many of its trade partners including China.

Therefore, it is imperative that India shed its defensive stance in preferential trade agreements. Domestic industry must be prepared to confront competitive pressures from imports and in international markets. While domestic policies must be formulated and legislated to ease investment conditions, FTAs must be utilised as trade policy instruments with significant potential economic benefits rather than as mere strategic policy instruments. Rigorous prior technical analysis to identify core sectors of comparative advantage and monitoring during implementation should be included in carefully designed FTAs. Safeguards must be used where necessary to protect weaker manufacturing units but not in response to protectionist lobbies. A more ‘open to competition’ stance should be adopted in RCEP negotiations. As comparative advantage evolves and shifts among regional economies, India must seek to take advantage in consonance with its skill set and strengthen its participation in regional value chains. Finally, India cannot take too long to evolve towards global regulatory standards and practices. Indian industry must utilise the time that remains for mega regionals to become a reality to prepare for the eventual change in the global trade regime.