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Why cosy up to Taiwan?

Singapore is the last place where I expected to get a hot tip on Indian foreign policy. Yet that is exactly what happened.

True to Singapore's laissez faire traditions, there is a commercial angle involved. So what's up? Simply this: taking the prime minister's 'Look East' policy a large step beyond anything envisaged, the mandarins of foreign policy are making overtures to Taiwan.

This, it goes without saying, marks a huge departure from previous policy. In the 53 years since the Chinese civil war ended in the victory of Mao's Communists, New Delhi has never recognised Taiwan's claims. (Other countries disagreed; Taiwan held China's seat in the Security Council for several decades, thanks to American pressure.) This continued to be true even in the years immediately after the India-China conflict when diplomatic relations between Delhi and Beijing were in deep freeze.

So, what is new today? According to my sources in Singapore, India and Taiwan are now in the process of negotiating a 'dual taxation' treaty.

There are a couple of points that come to the fore at once. First, what effect will this treaty, assuming it is signed, have on India's relations with China? Second, what exactly is the need for such a treaty?

Strictly speaking, I understand that the negotiations are not being conducted directly by New Delhi and Taipei. Instead, it has been proposed that the agreement on dual taxation be signed by two non-governmental bodies. Their proposals shall then be independently adopted by the two governments. Is anyone fooled by this silliness?

Taxation, and this is true of every nation on this planet, is a matter for governments, not for non-governmental organisations. Do you think anyone in China will be taken in by this evasive manoeuvre? Or that the Chinese authorities will not resent any such links?

It is no secret that many members of the Vajpayee administration dislike China. Its nuclear armoury was one of the reasons cited for Pokharan II, and Defence Minister George Fernandes is known to sympathise with the movement to liberate Tibet. But how exactly shall India gain from cozying up to tiny Taiwan?

Moving on, I would love to know the economic rationale behind the treaty. How many Indians are there in Taiwan, setting up industries or otherwise negotiating commercial deals with that island republic? Conversely, what is the quantum of foreign investment from Taiwan to India? Is there really so much of either that a dual taxation accord needs to be drawn up?

Part of my uneasiness about the subject comes from memories of a similar treaty that India inked with another small island republic, namely Mauritius. (Of course, there are historical and ethnic links with Mauritius as there never have been with Taiwan.) That agreement was a very costly mistake for India.

The dual taxation treaty with Mauritius was interpreted in an extremely liberal manner when Yashwant Sinha (now the external affairs minister) was India's finance minister. The manner in which overseas commercial banks used it as a conduit for precious hard currency is something that still needs to be audited. By one rough and ready reckoning, India lost US $1 billion thanks to this treaty, and some claim that it was actually three times that figure!

In the circumstances, I think we must ask the mandarins in the external affairs ministry precisely why they seem so eager to push another such agreement. What are the compelling reasons for India to get into such a mess?

Are there sound economic reasons? If so, please give us the number of Indians investing in Taiwan, or the other way round. There is no strategic reason, given that Taiwan is too weak militarily to offset Chinese power on India's borders. There is no particular geopolitical reason given that Taiwan does not have even a seat in the United Nations any longer (leave alone a presence in the Security Council).

The Mauritius experiment rebounded to the benefit of a few clever 'operators'. (I am not sure if they should be dignified with the name of 'entrepreneurs'!) India lost heavily, and the OCB route has subsequently been sealed by the Reserve Bank. Is Delhi now looking for another such disaster courtesy Taiwan?

I have no great respect for the tenets of Nehruvian foreign policy. If there is a sound reason --- moral or military, economic or political --- to come closer to Taiwan, so be it. But we deserve to be told what that reason is. The next time such a thing happens, I hope I get to hear it from someone in Delhi rather than have it sprung as a surprise by friends in Singapore.

T V R Shenoy