Diplomatist Magazine Diplomatist January 2019 | Page 44

INSIDE EUROPE
Policy Directions to boost Indo-Swiss Trading Relations
Indeed, free trade agreements and other negotiations
would help increase trade between the two nations and
there have been such agreements over the past few years.
However, international trade is structurally determined as
has been explained by Steven Krasner (1976) in his landmark
study on international structures, distribution of power and
capabilities and the combined impact of these factors on
trade openness. While India bids to forge an India-European
Free Trade Agreement (EFTA) with Switzerland’s support, it
would be much better positioned to freeze such accords with
a more robust internal economic structure and a greater level
of economic development.
The logic of this argument has been laid out by Steven
Krasner (1976). He explains that the degree of openness
for the movement of goods between two nations, i.e. trade,
depends upon the nations’ individual as well as relative
interests. Nations’ interests, in turn, are informed by their
relative levels of economic development, and their respective
size. This is opposed to the neo-liberal logic that irrespective
of interests and size, states will be motivated to engage in
higher levels of free trade.
Without going much in detail about Krasner’s reasoning
(which the interested reader could fi nd in his paper entitled
“State Power and the Structure of International Trade”, 1976)
let us focus on the implications of Krasner’s research to
explain how trading between India and Switzerland can be
increased even further.
will be moderate to high. Now the way to increase the trade
between the two nations so that it may remain at high levels,
the policymakers would need to aff ect structural changes. In
the graph above, to take trading levels from “moderate” to
“high” (from bottom right cell to top right cell) one would
need to make the level of development of the two states from
unequal to more “equal”.
Indeed, it can be argued that after-all trading agreements
are aimed at bringing economic prosperity to nations so
the argument of having economic development in India to
forge stronger trading agreements with Europe could be a
redundant one. Yet one needs to keep in mind that trading
brings home more than economic prosperity - it impacts the
balance of power between nations as has been rightly pointed
out by scholars like Joanne Gowa. Trading Agreements foster
international political partnerships and collaboration which
is perhaps its most important externality. Indeed, political
partnerships between nations such as Switzerland and India
who value democracy, neutrality, and non-aggression is
only desirable for the objective of world peace. Thus, trade
between these two nations would only strengthen the stability
of the world.
Krasner’s Framework to ascertain the level of trade
between nations (Krasner, 1976):
According to Krasner, there will be moderate-high levels
(bottom right cell) of trade in nations with unequal levels
of development and unequal size. Indeed, this applies to
Switzerland and India. In terms of size, India is a large state
and Switzerland a small one. On the other hand, in terms of
the level of development, Switzerland is a more developed
economy than India whether in terms of purchasing power
parity or in terms of factor mobility. Therefore, as per
Krasner’s prediction, the trade between the two nations
44 • Extraordinary and Plenipotentiary Diplomatist • Vol 7 • Issue 1 • January 2019, Noida