Yesterday, US Senate approved the passage
of National Defence Authorisation Act 2020 with a proposal of giving a
NATO-ally status to India. The legislation aside upgrading India’s status on
par with countries like Israel and South Korea will pave way for increased
India-US defence cooperation especially in the Western Indian Ocean maritime
security, counter terrorism, counter piracy and humanitarian assistance. Within
180 days of enactment of this legislation, US defence secretary will submit a
report on the joint Indo-US joint military exercises and defence cooperation in
the Indian Ocean Region. The report will be processed by House of
Representatives and once the House approves it, both Houses would recommend the
amendment for President’s final signature to make it into a law. The upgrade,
will immensely enhance the Indo-US strategic ties and will ease India’s
high-end defence purchases from the US. This new elevation further to the
recognition of India as a “major non-NATO ally” in 2016 followed by signing of
foundational agreement COMCOSA (Communications Compatibility and Security
Agreement) during the maiden 2+2 Ministerial Dialogue in 2018 reinforced
growing convergence and cooperation between both countries.
Expectedly, these promising
developments invigorated new hopes of deepening Indo-US strategic partnership. But
conflicting messaging of President Trump, reckless name calling of India on
trade tariffs and increasing carbon emissions equating it with China has
triggered fresh doubts. With frequent scathing references to India’s import
duties the US dubitably etched itself as a big bully. Further the termination
of India’s “Generalised System of Preferences” for not assuring an “equitable
and reasonable” access to its markets created fresh strains in Indo-US ties.
Under GSP over 2000 Indian products worth $5.6 billion entered US markets duty
free in 2017. Trump’s decision which came days after new government took charge
widened the gulf. In retaliation, India imposed duties on 28 American products
including almonds, walnut, pulses and apples after a delay of one year. Citing
security reasons, America last year imposed 25% tariff on steel and 10% duty on
Aluminium products from India. India refrained from imposing duties in the hope
of resolving the issue through negotiations. After America pulled plug on the
GSP, India imposed retaliatory duties.
America is India’s largest trading
partner. The volume of trade in goods and services accounts for $142.1 billion
with the trade balance in favour of India. To mitigate the trade deficits,
India began importing crude from America from 2017 despite the huge
geographical distances. While it takes eight to ten days for oil imports from
West Asia to reach to India, the wait is 50 days long for American crude
imports. After America’s waiver of sanctions for importing oil from Iran has
expired in April, oil supplies from US increased by four-fold to 6.4 million
tonnes. Similarly, to address Trump’s obsession with trade surplus, India increased
its defence purchases and lined up $10 billion worth orders.
Being a developed economy, to
protect its domestic interests, India imposes duties due to which it is derided
as protectionist by economists. On a comparative scale, developed countries
like Japan, South Korea, Australia and the US outmanoeuvre India in terms of
higher duties. India’s regulatory pricing of the stents, knee implants from
American companies, tightening of e-commerce rules, imposing licencing
requirements on imports of Boric Acid and the February 2019 draft policy of
localisation of the server farms and data centres in India compounded Trump’s
fixation of India hurting America’s business interests. In response to India’s
new draft policy America threatened to impose data localisation restrictions on
Indian companies thereby increasing operational costs for Indian companies and
demanded removal of tariffs on all ICT products. These latent trade irritants
that have persisted from the time both countries started trading have become
more irksome due to Trump’s impatience. Trump’s transactional approach and
blunt public references has complicated America’s relations with its
traditional partners and India is no exception.
While trade transactions have been
one major area of dissonance, India is feeling the heat of America’s sanctions
on Iran and Russia which are overstepping its “red lines”. Especially America’s
opposition to India’s purchase of $ 5.2 billion Russian S-400 Triumf missile
defence system triggering Countering America’s Adversaries Through Sanctions
Act (CAATSA) is now a major bilateral irritant. During Secretary of State Mike
Pompeo’s visit to India days ahead of Modi-Trump meeting along the sidelines of
Osaka G-20 Summit, External Affairs Minister Jaishankar Subramanyam asserted
that India would act on “what is in our national interest”. He added, “India
has many relationships with many countries, many of them of long-standing. They
have a history. And part of that strategic partnership is the ability of each
country to comprehend and appreciate the national interest of the other. And
part of that strategic partnership is the ability of each country to comprehend
and appreciate the national interest of the other”. India has unequivocally
conveyed its reluctance to make any trade-offs on vital strategic interests.
Russia has been India’s major defence supplier. 70% of defence equipment in
armed forces is of Russian origin.
Similarly, India is facing shortage
of oil supplies due to US sanctions on Iran which accounts for 11% crude
imports. With waiver of sanctions from May, India was forced to cut down its
imports to zero. American sanctions on Venezuela also affected oil supplies.
Simmering US-Iranian tensions have heightened India’s concerns of energy
security and the safety of over eight million expatriates living in the Gulf
region. Driving home the message of the fall out of the exacerbating tensions
between the US and Iran, Jaishankar told Pompeo, “the developments in
this region will affect the fragile world economy and the U.S. must not do
anything to exacerbate the tensions”. Setting a stage for the big meeting
between the leaders of both countries, New Delhi has clearly spelt out its
unwillingness to compromise on core bilateral issues.
Growing fissures over various
issues between countries raised speculations of differences creating a rift in
what is now a deepening strategic partnership. Summarising the outcome of his
talks with Indian counterpart, Pompeo said, “partnership is already beginning
to reach new heights” and “great friends are bound to have disagreements”. But
ahead of Osaka meet, Trump tweeted, India’s high tariffs on the US goods are
“unacceptable” and must be “withdrawn”.
Amidst mounting frictions, Prime
Minister Modi held talks with President Trump along the margins of G-20 Summit at
Osaka. Lending credence to the Pompeo’s assertion of “Modi hai to mumkin hai” focussed
on ironing out outstanding differences, Modi publicly listed out four principle
issues for discussion- simmering crisis in Persian Gulf, by implication its
impact on India’s oil imports and fragile security in the region; readiness to
resolve trade issues; 5G and defence (India’s plans of purchasing S-400 from
Russia). Though the outcomes of the meeting are not known, officials described
it as “positive” and “pragmatic”. After the talks, Trump made no reference to
the tariffs but said that there “would be big things to announce, big trade
deals”. Clearly the focus of Trump has been trade. As agreed during the talks,
reports suggest US trade representatives are going to arrive in India for talks
next week.
While it is likely that India might
make concessions on trade tariffs, Trump’s hyphenation of India with China with
respect to trade practices is utterly atrocious and imprudent. India’s trade
surplus of $23 billion is measly compared to China’s trade surplus of $419 with
the US. America derides India’s stringent regulatory trade procedures and
protectionist practices. As opposed to Indian trade policy, China’s predatory
practices including infringement of IPR and intellectual espionage are perilous.
With President tipped to transit into election mode, his tirades against
nations with trade surplus might be much shriller. Given his enthusiasm to keep
campaign promise, he might as well approve investigation of India’s
protectionist practices under the section 301 in case of delay in reaching a
bilateral trade agreement. Trump flagged off tariff regime on China after a
green signal from USTR. Trump’s uncertain foreign policy has confounded
strategists but till now he hasn’t wavered from his campaign promises. Having
promised to enact, “free, fair and reciprocal trade agreements” Trump might
adopt inflexible approach towards trade related issues. While nations are known
to advance its interests, Trump’s blatant transactionalism overstepped the
decorum of diplomacy.
Ideally at times when US-China
trade tariff war is snowballing into a cold war with animosity slowly
permeating into other aspects, the US must consider deepening its relations
with India, with matching human resources and strategically located in the
Indian Ocean region to stall China’s march. Besides bolstering defence
cooperation with India, to check mate the global reach of Huawei, the US must consider
collaborating with India to develop 5G technology. Given the growing face-off
between the US and China, rise of a democratic India will be in the best of
interest of America and the region as well. Besides, India’s commitment towards
free and open Indo-Pacific bodes well America’s objective of a peaceful and
stable Indian Ocean Region.
Post-Osaka talks, White House
briefing acknowledged “The leaders affirmed that as responsible democracies, a
close partnership between the United States and India is central to global
peace and stability”. A robust strategic partnership between the oldest and
largest democracy will bode well for world order. Countries should make some
concessions without crossing redlines to give a fillip to Indo-US ties.
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