On June 1, 2019, India’s top diplomats woke up to the news of the United States of America having banished India from the Generalized System of Preferences (GSP). Donald Trump, the 45th President of America, in a proclamation issued to modify the list of beneficiary developing countries, said “I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.”
This move, which was a long time coming for the Indian diplomats, marked an all time low in the Indo-US strategic relationship. Following terminations of India’s designation as GSP nation, US $5.6 Billion worth of Indian products exported to the US, which were prior traded on a duty free basis were now to be taxed. This meant a blow to India’s Agricultural, handicraft, automobile and electronic establishments and also a deep strain to the Indo-US strategic relationship.
An incoherent foreign policy through President Trump’s tenure at the White House has ensured that this bilateral relationship traverses through some of the most uncharted territory. A relationship which has been solidly built up on shared values and mutual trust is now under duress. President Trump has time and again threatened India of increased tariffs and charted the course for a trade war.
While President Trump continues his rant against what he terms unfair trade practises of India and repeatedly puts it the eye of his Twitter storm, the top US diplomat – Secretary of State Mike Pompeo – travelled to India between June 24-26 to find a heal and cure to the now sore strategic relationship.
Pompeo’s visit to India has gained great significance as diplomats at both New Delhi and Washington D.C are struggling to align the foreign policies of the respective administrations at helm. Counter tariffs are in effect under the bilateral mechanism for the maiden time.
From once being an aggressor force to now being one of the most trusted strategic partner, the United States of America has in the past few decades effortlessly sailed ever closer to India. The Indo-US partnership, viewed as one of the most robust bilateral relationships in the world, has been solidly built upon mutual trust and common values. A time tested relationship, it has traversed through the most treacherous times, being it during the cold war era or during the numerous instances of Indo-Pak aggressions.
Be it the democrats or the republicans at power, in the past decade, India has been a nation they have stoked regardless in an effort to sustain America’s efforts in the region. However, it has largely been feared that under the Trump administration, the relations have hit an air pocket, throwing a wrench into decades of diplomacy.
The tune for Indo-US relations under President Trump began with his infamous Twitter rant “India is a very high tariff nation. They charge us a lot. When we send a motorcycle to India, it’s a 100 per cent tariff. They charge 100 per cent. When India sends a motorcycle to us, we brilliantly charge them nothing.” The strategic relationship, which was at an all time high just years back, has for the first time slipped and taken a step towards marking the beginning of a trade war.
For Secretary Pompeo, India is a known business destination. Through his tenure in running a company that manufactured and supplied aircraft parts, Pompeo has done business with Indian business and Government establishments for years. He understands that India with its fast booming economy is a sea of opportunities and also that the success to Indo-US relations rests on responding to the reservations of his host.
Through his stay at New Delhi, Secretary Pompeo met with top Indian officials to communicate Trump administration’s position when dealing with India. His meeting with PM Narendra Modi and External Affairs Minister (EAM) S Jaishankar, his counterpart in New Delhi, are expected to have revolved around pacifying India and guaranteeing of guarding shared mutual interests.
For Indian diplomats healing of the Indo-US trade relations remains at the top of the agenda. At a time when the Indian economy is showing signs of a regression, any trade tensions with the USA, its biggest trading partner, would be a matter of great concern.
India has been working hard to address the concerns of trade deficit raised repetitively by the Trump administration. The deficit which was at US $27.3 Bn in 2017 has now reduced to almost US $24.2 Bn. While India is exporting goods and services worth US $83.2 Bn to the US, America’s export to India stands at US $107.4 Bn. The bilateral trade quotient amongst the partners is growing at a staggering 12.6% year-on-year.
With increased co-operation towards the IT and electronics, defence equipments and energy sector the bilateral trade the partners is expected to grow over the years. In the energy sector alone, US is establishing itself as a major supplier to India. While US had supplied India with 10 million barrels of crude oil in 2017, the same has breach the 50 million mark in 2018.
It is this growing relationship that Pompeo aims to save from the trade tensions. The retaliatory tariff imposed by India has impacted US goods worth US $543 million. India has targeted agricultural products with some items witnessing a rise of tariff of almost 90%.
Secretary Pompeo himself hinted said that his department had not fully backed the tariffs on Indian products. In an effort to water down the threats of a full blown trade war, officials in D.C have deputed Assistant US Trade Representative (AUSTR) for South and Central Asia, Christopher Wilson on a visit to New Delhi. Wilson during his visit will sit down with top Indian officials, both from the MEA and the Commerce Ministry, to work on a recourse to the bump in the relations.
EAM S Jaishankar talking about the bilateral during the joint press address, said “India and the United States have a strategic partnership, and that is actually based on deep and broad convergences, which have been steadily growing over the last many years. Obviously, there will be some issues on which we have our individual perspectives. But I think for us today, both as countries and as foreign ministers, harmonising our interests and our views, that’s really the task of diplomacy and I think Secretary Pompeo would agree with me today that we’ve earned our pay. ”
Within 48 hours of Pompeo’s visit, President Trump again took to Twitter to say “I look forward to speaking with Prime Minister Modi about the fact that India, for years having put very high Tariffs against the United States, just recently increased the Tariffs even further. This is unacceptable and the Tariffs must be withdrawn!”.
While this tweet on the eve of his bilateral with PM Modi on the sidelines of G-20 Summit in Osaka had raised eyebrows at both New Delhi and Washington D.C., it seems that the partners have now broken ice.
President Trump speaking soon after his bilateral with Modi, said “I think we are going to have some very big things to announce. Very big trade deal. We certainly work together on trade and we discussed trade today. I think we will just continue to get along with India.”
Growing Strategic and Defence Co-operation
For America, India is at the epicentre of its efforts to stabilise the Indo-Asia-Pacific region. With the third largest standing army, the fourth largest air force and the fifth largest navy, India, an emerging economic and military power in the Asian region, has the right characteristics to counter the growing Chinese influence in the strategic Indo-Pacific waters.
Defence Co-operation has emerged as a cornerstone in the Indo-US bilateral relations. From having had almost no defence trade with India in the 90s to now being one of the largest supplier to the Indian armed force, the USA has clawed deep into India’s lucrative defence market. In the last decade alone, US companies have been successful in selling high-tech military hardware, ranging from front-line battleships to crucial strategic lift aircraft, worth over US $18 Billion to Indian forces.
Successive administrations both at New Delhi and Washington have been trying relentlessly to add pace to this vertical. In 2016, the USA accorded India a ‘Major Defence Partner (MDP)’ status, putting India on par with the America’s closest NATO allies and partners. US has also elevated India to STA-1 status, promising India unhindered access to critical and sensitive defence technology and hardware. However, both the partners have failed to operationalise this much vaunted status, even after successive National Defense Authorisation Acts, US’ defence budget document, having reaffirmed India as a MDP.
Both EAM Jaishankar and Secretary Pompeo are learnt to have discussed irritants plaguing the operationalisation of this vertical. Another key concern that the principals addressed was the delay in programs being handled under Defence Trade and Technology Initiative (DTTI).
The bilateral also provided a stage for India to discuss with US its share of concerns in regards to the latest developments in the Persian Gulf. Increased tensions between the US and Iran have put the country’s on brink of war.
Oil tankers carrying precious crude oil are repeatedly being targeted along the Strait of Hormuz. While US is blaming Iran for the attacks, Ayatollahs have repeatedly shrugged off the allegations. Only last month, Iran shot down an US surveillance drone citing violations of its sovereign airspace.
This increased tensions along the Strait of Hormuz, a vital chokepoint in the Persian Gulf, is a great concern to India. Hinderance to passage of vessels along this chokepoint would bleed the country of its supply of crude oil from the East. Close to 60% of India’s oil crosses this vital chokepoint.
Pompeo acknowledging India’s role in reconstruction in Afghanistan, called upon India to play a greater constructive role in the country. While US is pushing for a peace process with Taliban, India has been skeptical about the peace deal holding in the fragile country. While India has its share of concerns with the peace process, the country has held to its seat at the talks in Qatar.
In light of recent developments, it is crucial that sustained dialogue at the highest level of the administrations is held time-to-time for addressing key irritants. The visit of Secretary Pompeo to New Delhi has helped the partners understand each others concerns and reservations.
