New Delhi, which has allowed a section of the bureaucracy to paralyse the historic nuclear negotiations with the US, should pay attention to the Sino-US strategic economic dialogue beginning this Tuesday in Washington.

At stake is the value of Chinese currency, the Yuan. Many in Washington have convinced themselves that an undervalued Yuan is among the reasons for the growing US trade deficit with China, which has mounted to US $232 billion in 2006 from US$205 billion in 2005.

While the Bush administration applies pressure on Beijing to raise the value of the Yuan by at least 10 per cent, Democrats are threatening a 27 per cent punitive tariff on import of Chinese goods.

Beijing, as always, is playing it cool. It is giving in a bit by increasing the bandwidth of Yuan trade from 0.3 per cent to 0.5 per cent. Its annual trade mission, timed to precede this week’s talks, has been traveling round the US with promises to buy more American products including soya beans worth nearly US$3 billion. Beijing is acutely aware that Washington could become a lot more confrontational if the Republicans, who are generally free trade-oriented, lose the White House in the next polls.

Think of India in a similar situation, of having to negotiate the value of its currency with the US. That would have caused our talking heads to thump the tables about India’s ‘sovereign right’ to define where its currency stands.

Currency might well be the ultimate symbol of national sovereignty. In a world of interdependence, though, absolute sovereignty is elusive even for the strongest powers.

... contd.