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Modi-Trump meet: Tangible gains for US, intangible benefits for India

LiveMint logoLiveMint 04-07-2017 D.Ravi Kanth

Two days before Prime Minister Narendra Modi bear-hugged US President Donald Trump on 26 June in Washington, a puzzling picture of Modi appeared on a cover page. It showed Modi riding a tiger. Surprisingly, the tiger’s paws and tail were covered with white paper. The title on the cover page was “Modi’s India: The illusion of reform.” Several critical and caustic commentary pieces accompanied that portrait in The Economist magazine of 24 June. What was unclear is whether the magazine was suggesting that Modi remains a paper tiger or somebody “who may go down in history for fulfilling India’s best shot at rapid, sustained development” or a prime minister who is contributing to “the worries about a still darker outcome” to come in India?

Nevertheless, a different image of Modi took to the centre stage after his meeting with Trump on 26 June. Glowing plaudits for Modi’s dexterous handling of complex negotiations with Trump dominated reams of positive coverage in the Indian media. That Modi secured his political and defence deliverables became the underlying theme of the coverage.

On the economic and trade front, “the United States and India—leading engines of growth in the global economy—should intensify their economic cooperation to make their nations stronger,” a joint statement said. The two countries “committed to further expanding and balancing the trade relationship” by removing obstacles to growth and job creation. The two nations resolved to “pursue increased commercial engagement in a manner that advances the principles of free and fair trade.”

Significantly, the US and India agreed to “undertake a comprehensive review of trade relations with the goal of expediting regulatory processes; ensuring that technology and innovation are appropriately fostered, valued, and protected; and increasingly market access in areas such as agriculture, information technology and manufactured goods and services.” The two leaders also committed to “strengthening cooperation to address excess capacity in industrial sector.”

As part of “Strategic Energy Partnership”, the US is going to export natural gas at a suitable price that’s acceptable to President Trump and clean coal. President Trump wants India to conclude the “contractual agreements between Westinghouse Electric Company and the Nuclear Power Corporation of India for six nuclear reactors.”

A day after Trump and Modi concluded their maiden agreement, US vice-president Mike Pence told US-India Business Council (USIBC) that “the bottom line is the United States and India can deepen our commercial bond in many industries and areas” in a “fair and reciprocal” manner. That bond will require India to strengthen “intellectual property protections and tariff cuts in manufactures and agricultural goods combined with breaking down barriers on investment and market access by India could even lead up to the USIBC’s aim of getting to the goal of $500 billion in two-way trade before the end of the decade,” Pence said, according to a report in the Washington Trade Daily of 28 June.

Ahead of the Modi visit, SpiceJet Ltd announced the purchase of 205 Boeing 737s worth some $22 billion and an additional order of 20 jetliners was announced early last month. “Aside from aircraft sales, the United States would benefit by filling other significant demands in the country especially for energy—from liquidized natural gas to solar equipment,” as well as the sale of Sea Guardian drones, Apache attack helicopters and C-17 transport aircraft.

Barring the reference to technology and innovation in the joint agreement, there was no mention of the Indian software industry’s travails in the American market, particularly the much anticipated changes on the H-1B visa front.

It was also not clear whether there was any discussion on the need for a “totalization” agreement (protection of benefit rights of workers and short-term IT and other services providers). The totalization agreement will free Indian IT companies from paying $1 billion to the American exchequer annually towards social security payment.

In effect, the latest agreement between the US and India seems like a balance sheet of “tangibles/material deliverables” bagged by the US on the one side, and the “intangibles/ uneconomic” brownie points scored by India on the other. Otherwise, it is difficult to explain why a nation with more than 1.2 billion people and having massive problems of poverty, disease burden, and unemployment in the world is ready to commit to a range of defence and other giveaways without securing concrete and measurable economic benefits.

Since the Spanish-American war of 1898, American leaders and negotiators always projected their aggressive/unsustainable demands for market access, as though it’s their birthright. It does not matter for the US whether its demands are consistent and in conformity with the existing multilateral trade agreements. And by raising the unilateral demands, say, for enhanced intellectual property protection or egregious tariff cuts for its subsidized agricultural goods, to a shrill pitch, Washington often manages to force the other side to accord the status of international obligations. The ‘America First’ and ‘Buy America and Hire American’ slogans of the unpredictable Trump administration seem like an ugly side. But there is a historical continuity in the US demands for market access in other countries without the give-and-take reciprocity.

But why blame the US when the smart foreign policy mandarins of India are prepared to negotiate such smart deals with Washington in which economics takes a back seat while illusory political/strategic objectives propel the outcomes. Unfortunately, today’s politics is driven by economics. One tweet from Trump might instantly reverse the so-called political/strategic gains that India thinks it has made during the meeting in Washington. It has already happened with Trump and his Atlantic partners and could well do with Trump and Chinese President Xi Jinping.

A trade war is about to break out between the US on one side, and the powerful industrialized countries of the European Union, China, Japan, and even Australia on the other as the Trump administration lurches towards imposing hefty tariffs on imports of steel and other products on dubious national security considerations. India must remain prepared for such an eventuality if the Trump administration tomorrow concludes that New Delhi is not opening the Indian market after “the comprehensive review of trade relations”.

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