Why trade openness and national security go together

Context: Relevance of Ricardo’s law in an era of protectionism and self-reliance especially India’s context.

Global Trade and Ricardo Law: The core proposition of comparative advantage (i.e. production of goods at a relatively low opportunity cost- Ricardian principle) is the basis of an interdependent world in which trade has grown from ($50 billion ???? $19.5 trillion) after World War II.

Factors giving rise to Decline of global trade: 

1. Populist backlash: The global financial crisis in 2009 triggered a strong negative reaction against free trade and countries use overt or covert protectionism (USA, JAPAN, and the UK). 
2. Rising Inequality: It led to various movements across society. 
3. Anti-globalized rhetoric: The USA – China trade war (issue of dumping, infringement of patent, and intellectual property theft) added fuel to the crisis.
4. Deficit in global institutions:  The architecture of internationalism is fighting for its survival (E.g. - USA withdrawal from WHO).
5. Distancing between countries: a literal and metaphorical consequence of the COVID-19 pandemic.

Waves of protectionism in India: 

• India has declared “Aatmanirbhar Bharat “as its response to the COVID-related crisis.
• India’s border skirmish with the Chinese has added to the nationalistic and protectionist chorus (Bilateral trade deficit approx. $57 billion). 

Best Policy for India in this context: 

• Use of smart power: Through diplomatic if necessary by military means India must uphold its territorial integrity.
• Creation of the virtuous cycle of growth through trade: This is only possible through acquire the know-how to build globally competitive products. 
• Economic Growth: The best policy for India is 8% real economic growth (Takshashila Institution). Only economic strength can result in true self-reliance (Ricardo’s law).  
• Thoughtful approach to self-reliance: localizing production increases costs to the economy and disproportionately impacts the poor.

Conclusion: A robustly open policy of trade, technology acquisition, and excellence serves India’s national interest.