Estranged, flat-lined or natural allies
February 28, 2020 | Expert Insights
Namaste Trump
When Trump arrived in Ahmedabad this month, he became the fourth consecutive American president to visit India. This signalled a new bond between two of the largest democracies. Barack Obama's two visits, in 2010 and 2015 elevated India as a strategic partner and signalled the shift of American foreign policy pivot to Asia.
The ‘Namaste Trump event brought interesting talks to light. Trump’s visit to India was met with scepticism and praise. President Trump and Prime Minister Modi focused on a wide array of bilateral and regional issues ranging from trade, defence, security, immigration, and counter-terrorism.
U.S. – India trade: what next?
A trade deal was in the offing after the tariff wars affected both the countries over the last year. Although no significant deal was inked, there were two MoUs and a letter of cooperation between India Oil Corporation. (IOC) and United States’ Exxon Mobil.
The first MoU allows for the use of Indian therapy systems and medicines to address mental health issues in the United States. Conversely, India is to gain a better understanding of western methods of dealing with mental health issues.
The second MoU dealt with prescription drug prices, the safety of medical products, and medical patenting laws. A lack of stringent laws on pharmaceutical patents is creating a monopoly on life-saving drugs required for tuberculosis, cancer, and cardiovascular diseases. The talk on the intellectual property rights front is being perceived as a knowledge-sharing agreement allowing Indian and American representatives to study each other's IPR laws.
The deal between Exxon and IOC would see India importing more Liquified Natural Gas (LNG) from the United States. This will allow India to raise the use of LNG in its energy sector from the current 6.2 per cent to 15 percent in the next 10 years. India's energy imports from the United States would reach $10bn in 2020.
The trade deficit, a concern for the United States, had declined from $30 bn to $24bn. Due to the "Make in India" campaign, tariffs on imports have increased, constricting trade relations with the United States.
Any tariff cut by India, however, needs to be done in a non-discriminatory manner as it applies to other countries as well. According to the World Trade Organization (WTO), this is an accepted norm as both countries are not negotiating a free trade agreement. For example, duty cuts on high-end mobile phones as demanded by the United States will benefit China, as Apple Inc. manufactures most of its phones there.
Deepening Defence Ties
A defence deal was signed where India bought attack helicopters and other the United States military equipment worth nearly $3billion. The two nations have signed defence contracts worth more than $15 billion since 2008, up from $500 million in all the previous years combined. This is a welcome addition to India's defence portfolio. India holds primary military contracts with Russia and France as well.
Both countries are carrying out negotiations over 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.
U.S. immigration, the H1B hurdle
The other area of contention between the two has been the movement of Indian skilled professionals to the United States under the H1B visa programme. President Trump has made immigration a major campaign theme, by building a wall with Mexico and denying immigration opportunities to a few African and Gulf countries. Indians are the top beneficiaries of the H1B visa. Nearly three out of four H1B visa holders were Indian in 2018, mostly from India's $150 billion IT sector.
The Indian industry in the U.S. pays contributes nearly $1 billion towards social security, which is only redeemable after a period of 10 years. The typical term of a temporary high skill visa holder is three to six years. Therefore, most workers are unable to derive any benefits from social security.
Assessment
- With the upcoming presidential elections in the United States, Trump hopes to appeal to Indian Americans, who have traditionally supported the Democratic party. Modi has his own share to gain: the recent loss of his party’s Delhi seat, backlash from the CAA protests, and the raucous over keeping Kashmir in telecommunication shut down for close to six months would need a lot effort to improve his image.
Both President Trump and Prime Minister Modi advocate a strong insular economic policy which caters to a domestic constituency. Hence, there is always the risk of President Trump's, "Buy American, Hire American" strategy clashing with Prime Minister Modi's, “Make in India'' campaign. The recent proposals for higher tariffs on imports in the Indian Budget for 2021 may come as a roadblock in resolving the ongoing trade disagreements between the two countries. Both countries, therefore, have to navigate the trade minefield with considerable caution and perhaps adopt a “give-and-take” approach for mutual benefit.
The benefits of being in good standing with the US can often be intangible. For one thing, it certainly influences governments in countries like Japan, Saudi Arabia, UAE, Germany, UK as well as the USA-dominated financial institutions like the IMF and the World Bank.
Image Courtesy: DW
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