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Insights into Editorial: The Trump visit as India-U.S. trade booster?

 

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Context:

The 45th American President will be in India on February 24-25. 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.

What are the priorities in the defence and strategic spaces?

  1. 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.
  2. 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.
  3. India and the U.S. are also said to be in negotiations regarding India’s potential purchase of drones, additional P-8I long-range, multi-mission maritime patrol aircraft and also Raytheon intelligence, surveillance, target acquisition and reconnaissance (ISTAR) aircraft.
  4. 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.
  5. 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.
  6. Modi may privately seek reassurances from his American counterpart to mitigate the fallout of such a scenario.

Support against terrorism:

This intense engagement has helped achieve robust support from the US against terrorism. This was evident after the Pulwama attack last year, leading to designation of Jaish-e-Mohammed chief Masood Azhar as a global terrorist under UN Security Council Resolution 1267, and the placing of Pakistan on the grey-list of the Financial Action Task Force. While Trump was once very critical on Pakistan, he has nuanced his position on Pakistan in the last seven months. And now, with a deal between the US and the Taliban likely on February 29, his approach towards Pakistan, long-time benefactor of the Taliban, will be tested in the months to come. Pakistan has consistently lobbied with Trump to mediate between India and Pakistan on the issue of Jammu and Kashmir. India has consistently maintained that India sees no scope or role for third-party involvement on Kashmir.

Chronology of U.S.-India trade squabbles:

  1. 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.
  2. 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.
  3. 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.
  4. India immediately imposed higher retaliatory tariffs on 28 U.S. products including almonds, walnuts, cashews, apples, chickpeas, wheat, and peas.
  5. 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.
  6. 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.
  7. 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.

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. 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, 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.”

Areas of contention:

The US feels that India is a high tariff country, and wants these reduced and a more predictable regime to conduct business. Although the growth is 10% per year, many feel the potential is much higher. The other area of contention has been the movement of Indian skilled professionals to the US under the H1B programme. While the US President has always made immigration a key campaign theme, it has not led to any major barriers for Indians so far. But in an election year in the US, the rhetoric could sharpen. Civilian nuclear cooperation has not taken off either, despite the historic nuclear deal, because of the nuclear liability law in India and Westinghouse’s bankruptcy. Reviving that conversation could help meet India’s energy needs.

Conclusion:

The strong strategic partnership is also based on an idea of “shared values” of democracy, rule of law, religious freedom and protection of minorities. The revocation of Article 370 and the new citizenship law and the NRC is testing this “shared values” principle. India’s position that these matters are “internal to India” has so far meant the Trump administration has not criticised India openly and sharply. 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, 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.