Namaste Trump: Can PM Modi make US prez look past the trade differences?

Rudra Chaudhuri, Director, Carnegie India
‘What the leaders of India want and are determined to have is a democracy that is indigenous to their own country – not English or American or French or Russian,’ wrote Eleanor Roosevelt. Diplomat, activist, and President Franklin D. Roosevelt’s wife, according to Mrs. Roosevelt, who travelled across India in the spring of 1952, ‘the democracy India is building probably will never be exactly like ours.’ After all, she continued, ‘there is no reason it should be.’

Few American leaders understood this at the time. President Harry S. Truman had in fact dissuaded American envoys from accepting postings to post-independent India. India was, according to Truman, a country associated with ‘people sitting on hot coals and bathing in the Ganges.’ It was not ‘important.’

That the US-India relationship has transformed is an understatement.

From cloudy musings about hot coals to nuclear deals, strategic partnerships in the Indo-Pacific, disagreements about data localisation and motorcycles, and $142 billion in trade (as of 2018), India and the United States share as unique a relationship as is possible. These are two outsized democracies whose leaders seek to evangelise (in the case of the United States) and guard (in the case of India) their own distinctive democratic advances.

As President Donald J. Trump makes his maiden visit to India, it is a genuine opportunity to reaffirm the strategic contours of a relationship that is currently a bit too defined by trade differences. Indeed, the President, and Prime Minister Narendra Modi, may not actually get to witness the signature of a trade agreement, which, reportedly, continues to be stuck on negotiations over the cost of healthcare products and dairy standards.

This visit ought to be about making clear to Trump that the larger promise of India outweighs the irritants associated with trade disagreements.

File Photo: US President Donald Trump and Prime Minister Narendra Modi

The increasing centrality of economics is partially the result of US Trade Representative Robert Lighthizer’s’ fascination with tariffs and duties. In the 1980’s, during the presidency of Ronald Reagan, Lighthizer trained his guns on Japanese made semiconductors and personal laptops. Presently, it’s on India’s tariff walls and standards on dairy, healthcare products, pharmaceuticals and two dozen other such items up for negotiation.

No doubt, partially, Lighthizer only amplifies Trump’s own conviction that ‘trade wars are good, and easy to win.’

Following a Section 232 investigation of the 1962 Trade Act in the United States in April 2017, the Trump administration imposed duties on the import of steel and aluminium on a range of countries and allies. India chose not to retaliate. The idea, as one senior Indian official remarked was ‘to appreciate Trump’s need to sure-up his domestic base.’ This appreciation died a quick death.

In April-May 2019, and following bitter disagreements between Indian and American trade negotiators on issues ranging from market access in India for US pharmaceuticals to the localisation of data, the US government removed India from the Generalised System of Preferences (GSP). The GSP permitted duty-free exports worth $5.6 billion to the United States.

For American officials, the GSP was a privilege. For Indian traders, it was normal. In terms of the volume of trade between the US and India, the advantages accrued by the GSP is hardly substantial. But in political speak, the GSP is to the Indian government what Indian import tariffs on the Harley Davidson is to Trump. The difference of course is that India has sought to reduce tariffs on Trump’s much-loved motorbike.

By the summer of 2019, it was clear that India’s slide to economic protectionism, it’s dipping growth figures, and the Indian government’s resistance to initiate factor market reforms (such as in land and labour) made the case of India less appealing to American corporations. In India, all it has done is to have made the American demand for concessions all that more difficult to oppose.

By the end of 2019, it was seemingly clear that Indian tariff concessions on products such as American apples and walnuts was not the breakthrough that Lighthizer would find appealing. At the same time, the American push for market access, especially in India’s fast-growing E-commerce space, healthcare, and with regards to Information and Communications Technology was a bridge too far for Indian negotiators.

It’s now been close to three years since the section 232 investigations in the US led to the trade troubles with India. Whether or not an exchange on trade can be signed, it should not take away from the significance of this visit.

Both in New Delhi and at Ahmedabad’s Motera Stadium, Prime Minister Modi has a genuine opportunity to nudge Trump off his Lighthizer track. Doing so will require shaking-off, even if to a degree and for a limited period of time, the deal-maker within Trump.

It will require spelling-out what both these countries can do together in a world genuinely in ‘disarray.’ Rather than let officials fixate on trade-related ends, it’s a chance to begin a dialogue on who might author new rules in the governance of innovative technologies, or, given the outbreak of the Coronavirus in China, how international alliances for pandemics prevention might be strengthened.  

In short, and as ‘Namaste Trump’ is underway, it provides an opportunity to elevate the grammar of this relationship away from stents and 1600-cc motorcycles, to those issues that, as Mrs. Roosevelt reminds us, made the competing advances to democracy all that more appealing.

Disclaimer: Views expressed are personal. They do not reflect the view/s of Business Standard.

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