- I do not think any economy in the world will be immune from the impact of the trade war, says Noel Quinn
- Noel says that the trade war is an opportunity for India
- As the US-China trade war heats up, the impact on India and other developing nations is being closely watched. With India’s economy showing signs of a slowdown, this trade war could be beneficial for the country if investments that would have otherwise gone to China come to India. Noel Quinn, chief executive, global commercial banking at HSBC, said in an interview that while it is an opportunity for India, the country cannot stay immune to the global impact of the trade war. Edited excerpts.
- How do you see the US-China trade war and how will it impact India?
- We clearly prefer an environment where there are no trade tensions. With respect to this, there are two potential impacts. First, I believe that there is the potential for a negative impact for us all globally—world trade, world consumption and the growth of global GDP could be negatively impacted by trade tensions between two large powers like the US and China. I do not think any economy in the world will be immune from the impact. There is then the potential for positive impact for India. By this, I mean that investments that otherwise would have gone into production capacities in China could be attracted to other markets like India, Indonesia, Thailand and Vietnam.
Do you think India is ready to receive these potential investments in terms of say timely approvals?
I think the goods and services tax (GST) is a good example of removing bureaucracy and red tape and barriers to trade and more needs to happen. The one thing I would say if I look at the historic and current strengths of the Chinese manufacturing is not that they just have good factories. It is that they have good logistics around the manufacturing capabilities, the ability to move goods from the manufacturing plant to the port and from the port to the overseas destination. Many of the markets looking to benefit from investments going into them will not only need to build manufacturing, but need the infrastructure necessary for movement of goods into and out of the country. That is where India still has some development to do.
Since you mentioned GST, could you explain how it has benefited trade?
The creation of GST has allowed a trade to take place within India much more easily than it used to be. Everybody thinks of trade as an international phenomenon, but actually trade within India is equally an opportunity for many small businesses. I would look at the positive aspects of GST and the uniformity of a tax system that allows free movement of goods within India. This makes the tax system easier to understand. It is going to have medium to long term benefits that are yet to fully materialize, and the physical ability to move goods and build national distribution capabilities and national sales capabilities within India will be the long-term positive effects of GST. I believe this can encourage overseas investments into India.
What innovations in global trade are you witnessing at the moment?
The biggest innovation impacting global trade is the digitization of documentation and all of the paperwork that is associated with trade today. The primary benefit of that is being able to authenticate documentation and therefore eliminate the risk of fraud because you have a digital certificate that has an identity and authenticity attached to it. The second benefit is the removal of paper and the processing of paper, which should lower the overall cost of transactions. The real reduction in the cost of doing trade will come from the third benefit though, which is the decrease in time between starting and finishing a transaction in a digital format. It will shorten the working capital cycle. So, if today a trade transaction takes 10 days, in the digital world, a trade transaction could take just one or two days.
