What is the prospect of cooperation on trade and tariffs, and will the key sticking points be overcome?
The story so far: United States President Donald Trump’s first foreign trip after his acquittal in an impeachment trial in the Senate will also be his first ever official visit to India. The 45th American President will be in India on February 24-25, spending time in Prime Minister Narenda Modi’s home State of Gujarat, and in New Delhi. At stake during Mr. Trump’s visit is the prospect of more cooperation on trade and tariffs, the possibility of major defence deals and the optics of a mass welcome at the just-constructed Motera/Sardar Patel stadium in Ahmedabad, which would hope to mirror the success of the “Howdy Modi!” event in Houston, Texas, in September 2019.
Where do the two countries stand on trade cooperation?
The world’s oldest and largest democracies have been, by and large, stable trading partners to each other, yet this area has not been without wrinkles in recent years, especially since Mr. Trump entered the Oval Office. At a broad level, U.S.-India trade in goods and services has grown at a steady clip from $16-billion to $142-billion during 1999-2018.
As a recent report by the Council on Foreign Relations noted, “U.S. and Indian officials have disagreed for years on tariffs and foreign investment limitations, but also on other complicated issues, particularly within agricultural trade. Concern for intellectual property rights has preoccupied the U.S. for thirty years, while issues concerning medical devices and the fast-growing digital economy have more recently emerged.”
At the heart of Mr. Trump’s foreign policy strategy are concerns about the trade deficit that the U.S. has with its economic partners worldwide. Although India does not rank among the top 10 in this regard — for example, its 2019 trade deficit with the U.S. of $23.3-billion is dwarfed by China’s corresponding figure of $346-billion — there have been a series of skirmishes between Washington and New Delhi over tariffs in specific sectors, and that has destabilised the bilateral balance to a certain extent.
What is the chronology of U.S.-India trade squabbles?
In March 2018, the Trump administration slapped “national security” tariffs of 25% on $761-million worth of steel and of 10% on $382-million of aluminium imported from India. Despite formal World Trade Organisation disputes initiated by India protesting these tariffs, Washington ended a year-long review of the U.S. Generalised System of Preferences (GSP) in June 2019 by removing India from the tariff concession system. This is said to have impacted nearly $5.8 billion of India’s exports, or more than 12% of exports to the U.S. in 2017. India immediately imposed higher retaliatory tariffs on 28 U.S. products including almonds, walnuts, cashews, apples, chickpeas, wheat, and peas.
Besides other agricultural products such as dairy, the Trump administration remains wary of India’s position on intellectual property rights protection, barriers to free-flowing foreign direct investment, symbolically important trade sectors such as Harley-Davidson motorcycles and medical devices.
The U.S. also recently changed the status of India, among other countries, to a “developed” country, to further reduce trade concessions that it could receive from the U.S.
The other side of the coin is the concern that India has expressed on multiple occasions regarding restrictions on visas for highly skilled professionals seeking to take up employment in the U.S. — even though the laws that brought in restrictions, for example by imposing higher visa fees, were passed before Mr. Trump entered office.
Is there any hope for a positive announcement on trade?
While there were initial signs that a “limited trade deal” might be hammered out when Mr. Trump and Mr. Modi meet, that aspiration fell through when it became clear that nothing on that scale would likely be finalised in this space until after the November 2020 U.S. presidential election. Thus U.S. Trade Representative Robert Lighthizer’s planned visit to India just prior to Mr. Trump’s was put off to a future date.
What unconfirmed reports point to presently is the possibility of a “mini trade deal” or more simply a smaller trade package announcement. This might include, reports suggest, an increase in India’s LNG imports from the U.S. In a similar vein, The Hindu reported earlier that “An MoU for India’s gas importer Petronet to invest $2.5 billion in U.S. company Tellurian Inc’s LNG project, that was signed during Mr. Modi’s visit to Houston, is likely to be formalised during Mr. Trump’s visit.”
What are the priorities in the defence and strategic spaces?
There is more positive news on the defence cooperation and trade front, with the likely announcement during the visit of Mr. Trump of a deal for 24 Lockheed Martin-built MH-60R Seahawk Multi-Role Helicopters for the Indian Navy; India’s Cabinet Committee on Security has cleared their purchase These 24 helicopters, said to be worth $2.4-billion, are likely to be procured through the Foreign Military Sales route of the U.S. government. India and the U.S. are also said to be in negotiations regarding India’s potential purchase of drones, additional P-8I long-range, multimission maritime patrol aircraft and also Raytheon intelligence, surveillance, target acquisition and reconnaissance (ISTAR) aircraft.
On the strategic front, Mr. Trump’s oft-reiterated promise to stop the U.S.’s “endless wars,” particularly by bringing home U.S. troops from Afghanistan, will possibly pose some thorny questions for Indian strategies in its neighbourhood. If the American withdrawal proceeds apace and alongside the possible revival of the Taliban’s influence, Pakistan-based terror elements or the Inter-Services Intelligence gain a stronger foothold in the power vacuum that will inevitably develop there, this could compromise Indian interests considerably. Mr. Modi may privately seek reassurances from his American counterpart to mitigate the fallout of such a scenario.
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