Mains Paper 2: International relations | Effect of policies and politics of developed and developing countries on India’s interests, Indian Diaspora.
From UPSC perspective, the following things are important:
Prelims level: Basic knowledge of the India-US trade relations.
Mains level: The news-card analyses the issues and concerns w.r.t India-US trade relations, in a brief manner.
- The US commerce secretary will be visiting India this week amid the reports of trade tensions between the two countries.
Opportunity to step back from confrontation
- The US might withdraw India’s trade benefits under the so-called Generalised System of Preferences that Delhi has enjoyed since the mid-1970s.
- This week’s dialogue must be seen as an opportunity to step back from confrontation and take a more strategic approach to resolving the current differences over a large number of issues.
- They include market access, reciprocity in tariffs, trade deficit, predictable investment rules and data localisation to mention a few.
- Over the last two decades, Delhi and Washington have dealt with and resolved far more complex issues.
Issues and Concerns
- To recognise the value of the trade relationship between the two countries and its huge potential
- There was a time, less than two decades ago, when “flat as a chapati” was the preferred label for US-India trade relations.
- Since then, the annual two-way trade has grown rapidly to touch nearly $130 billion last year (including trade and services).
- For India, the US is probably the most important trade partner today and will remain so for a long time.
- For Washington, the size of the trade volume with India is quite low in comparison with its other key partners like Canada, Mexico, the European Union, Japan and China.
- But the potential remains high as India emerges as the world’s third-largest economy.
- It should, therefore, be the highest political priority for India and the US to turn this trade relationship into a deeper and more sustainable one.
2. Both countries need to be sensitive to the domestic political considerations
- As India enters the election mode, this is perhaps the worst possible moment for the US to take actions like the withdrawal of GSP benefits.
- The volume of Indian exports involved is quite small, but the political impact could be way out of proportion.
- On its part, Delhi needs to pay greater attention to the profoundly altered environment in Washington on trade related issues.
“Free trade” to “fair trade”
- Trump has begun to turn America, for long, the champion of “free trade”, into an advocate of “fair trade”.
- Trump has convinced himself that the rest of the world has taken advantage of America’s open market.
- He is now ready to bring the whole house down if the rest of the world does not address his grievances.
- India must bet Trump’s concerns about trade outlast his stint as US president.
3. Turning the two “estranged democracies” into “indispensable strategic partners”
- It is quite easy to forget the personal role of the Indian prime minister and the US president in turning the two “estranged democracies” into “indispensable strategic partners” in the 21st century.
- In India, successive Prime Ministers Atal Bihari Vajpayee, Manmohan Singh and Narendra Modi chose to defy conventional political and bureaucratic wisdom to advance the country’s relationship with the US.
- Washington has little reason to politically embarrass Prime Minister Modi — who has moved the security and political relationship beyond any one’s imagination — on trade issues just before a tough general election.
- Delhi, on the other hand, should appreciate the great political value of a trade deal with India for Trump and the importance of having the White House on India’s side.
Never stop negotiating
- Finally, the secret to successful engagement with the US involves two simple propositions — never stop negotiating and keep making deals small or big.
- India often can’t close a negotiation because it’s opening bid tends to remain the final position.
- Americans, on the other hand, are always open to splitting the difference, finding a compromise and moving on.
- It was with the ability to give and take, while keeping the larger and long-term interests in mind, that India and the US were able to overcome the multiple problems in the nuclear and defence negotiations during the last two decades.
- Continuous forward movement however slow and incremental is critical.
- Unlike security issues, trade is not a zero-sum-game and should be more amenable to deal-making.
- Given the return of geopolitical confrontation and the unfolding rearrangement of the global trading order, “doing nothing” is not an option for Delhi.