Mains Article

India – US New Age Relations [Mains Article]

The two governments must now strive to complete the unfinished agreements and set the course for their newly designated ‘Comprehensive Strategic Global Partnership’.
By IT's Mains Articles Team
March 03, 2020

Contents

  • Introduction
  • India-US Changing Relations
      • Why Such a change in Indian gesture?
      • Accomplishments of India-U.S. ties over the years
  • Why trade with the US matters to India?
      • RCEP Exit
      • Global Economic Slowdown
  • US objections with Indian trade rules
  • Is India really a “Tariff King”?
  • American steps against Indian Trade
  • Outcomes of the US President Visit
      • Joint Rally
      • Actual bilateral outcomes
      • Deals Inked during the visit
  • How tactical is it to manage such relationships?
  • Conclusion

India – US New Age Relations

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Introduction

It is easy to be contrarian about U.S. President Donald Trump’s visit to India but New Delhi needs the continued support of the U.S. government on almost everything substantial that matters to India in its quest to be a power of substance in the international system.

India-US Changing Relations

  • In 1971, the Friendship Treaty with the Soviet Union was a response to the continuing U.S. tilt towards Pakistan. That time India was closer to Soviet Union.
  • But in 2008, Prime Minister Manmohan Singh effusively praised President George W. Bush and told him that the people of India “deeply love him”.
  • In 2020, the US President Donald Trump concluded his maiden trip to India from 24-25 February. The event opens new dimensions to strengthen the bilateral relations and build long-term strategic partnership between the two nations
  • According to the latest Pew Surveys of Global Opinion, support for Mr. Trump in India is high enough to suggest a great deal of public affection for the American President. That itself is a marker of the way India and Indians now see the world.

Why Such a change in Indian gesture?

  • The current heightened Indian tilt towards US is the result of beginnings of a Washington-Beijing friendly alliance.
  • The hegemonic China in the Indo-Pacific region is helping to cement this relationship. Beijing has managed to alienate nearly all its neighbours and allies, except North Korea and Pakistan.
  • From a fairer trade regime; to accessing cutting-edge technology, to the fight against terrorism, to stabilising our region, India stands to benefit from constructive ties on all issues, given a more sensitive United States.

Accomplishments of India-U.S. ties over the years

  • A foundational military agreement that allows for the sharing of encrypted communications and equipment.
  • A change in U.S. export control laws that places India in a privileged category of NATO and non-NATO U.S. allies.
  • A new ‘2+2’ foreign and defense ministers dialogue.
  • An exponential increase in U.S. oil exports to India.
  • The inauguration of the first India-U.S. tri-service military exercise and an expansion of existing military exercises.
  • The signing of an Industrial Security Annex that will allow for greater collaboration among the two countries’ private defense industries.
  • The inclusion of India and South Asia in a U.S. Maritime Security Initiative.
  • In 1995, total two-way trade between India and the US was $11 billion. In 2018, it crossed $140 billion. It is reported to be around $150 billion in 2019.

Why trade with the US matters to India?

1. RCEP Exit

  • India has decided to opt out of the Regional Comprehensive Economic Partnership (RCEP), the world’s “largest” regional trade pact. With this decision India shut the door on the large “integrated market” that the deal was offering.
  • This decision has also increased the pressure on itself to strengthen existing separate trade agreements with each member of the RCEP bloc.

2. Global Economic Slowdown

  • In the backdrop of the global economic slowdown, where India’s global exports have fallen consistently, it is important for the country to diversify and strengthen bilateral relations with other markets.
  • It has set its sights on “large developed markets”, improved access to which would help its industry and services sectors. These include the US, which has, over the last two decades, become a crucial trading partner in terms of both goods and services.

US objections with Indian trade rules

  • Trade has long been a contentious issue between India and the US. There had been enduring tension since the late 1980s between the US demand for greater market access, intellectual property protection, and a host of other demands and India’s own cautious approach to economic liberalisation.
  • While the US’s deficit with India is only a fraction of its deficit with China (over $340 billion in 2019), American officials have repeatedly targeted the “unfair” trade practices followed by India.
  • These include the tariffs that India imposes, which the US feels are too high — and over which the President has personally called New Delhi out on several occasions.
  • India is a “tariff king” that imposes “tremendously high” import duties, President Donald Trump has complained repeatedly.
  • He has cited the example of Harley-Davidson, the US motorcyclemaker. Even after India halved the duty on the bike to 50% in 2018, he has said the rate is “still unacceptable”.

Is India really a “Tariff King”?

  • While it is often assumed that duties on the large-engine motorcycles like Harley- Davidson have put US companies beyond the reach of most Indian consumers, the fact is that a plant at Bawal in Haryana has been assembling the bikes since 2011, and Harley has still not captured a sizeable chunk of the Indian market.
  • Fewer than 3,700 of the motorcycles were sold in India in 2017 and that too mostly cheaper models that were assembled in the country.

American steps against Indian Trade

  • In 2018, the US imposed additional tariffs of 25% on steel and 10% on aluminum imports from various countries, including India. It brought down the US share in India’s steel exports to 2.5% in 2018-19 from 3.3% in 2017-18.
  • In June 2019, the Trump administration decided to terminate India’s benefits under the Generalised System of Preferences (GSP) scheme, which provides preferential, duty-free access for over $6 billion worth of products exported from this country to the US. India was the largest beneficiary of the US GSP programme.

Outcomes of the US President Visit

  • President Donald Trump’s India visit can easily be cleaved into two separate parts:
  • The symbolism of the joint rally with Prime Minister Narendra Modi, along with their obvious personal rapport
  • The actual bilateral outcomes of their Delhi meeting.

Joint Rally

  • It is clear that the public address at Ahmedabad’s Sardar Patel Stadium reflected an unprecedented relationship between the leaders of India and the United States, with each expressing admiration of the work they had done in their own countries.
  • Mr. Trump referred to Mr. Modi as a “true friend”, and a “tremendously successful leader”, who he credited with India’s progress.
  • Mr. Modi in turn complimented Mr. Trump for his leadership, and thanked Mr. Trump’s family for what he described as a historic visit that will open a new phase.
  • The invitation to Mr. Trump was in itself a political endorsement, given that it came in an American election year, months after Mr. Modi referred to the slogan “Abki Baar Trump Sarkar” at his Houston rally.
  • Mr. Modi would have been particularly pleased on three counts: with Mr. Trump’s refusal to speak about restrictions in Kashmir, about the arson over the CAA that darkened Delhi’s skies even as the two leaders met, and Mr. Trump’s endorsement of Mr. Modi’s belief in “religious freedom”.
  • This was some relief given earlier briefings by U.S. officials that these would be raised.

Actual bilateral outcomes

  • The visit’s concrete outcomes were not as dramatic or historical as the Trump-Modi rally images were.
  • Although the External Affairs Ministry had said at least five MoUs would be ready for signing, the three made ready were two on health care, and one Letter of Cooperation on LNG pipeline infrastructure.
  • There were a few major deals signed around the visit as well, and at least two that had been expected could not be completed — the conversion of an MoU for Petronet to invest in American gas company Tellurian into an agreement, as well as a commercial agreement for Westinghouse to build six nuclear reactors in Andhra Pradesh.
  • The agreement signed for defence purchases worth $3-billion, including American helicopters, has led to both sides signalling more cooperation in defence, military exercises and technology sharing.
  • The two leaders shared strong language in references aimed at China’s hegemony in the South China Sea as well as the Belt and Road Initiative, they did not broach the next steps in the Indo-Pacific partnership including possible militarisation as well as joint funding to counter the challenge from Chinese loans in the region.

Deals Inked during the visit

1. Defence Deal:

  • India is to buy attack helicopters and other US military equipment worth $3bn.
  • There has been a defence deal on other things including Indian procurement of 24 MH-60 Romeo helicopters from the US at a cost of $2.6 billion.
  • Another contract was signed to acquire six AH-64E Apache helicopters for $800 million from the US to enhance joint military capabilities.

2. Energy Deal:

  • India and the US have decided to boost trade in crude oil and liquefied natural gas (LNG) and also strengthen technology partnerships in the energy sector.
  • The move will support India’s plan for $60 billion worth of investments in developing infrastructure for a cleaner, gas-based economy.
  • US firm Exxon Mobil and Indian Oil have signed an agreement to help India import more Liquefied Natural Gas (LNG).

3. Enhancing cooperation:

  • The countries have vowed to seek co-operation in fighting radical Islamist terrorism and resolved to eliminate terror operations on Pakistan soil.
  • India and US discussed 5G technology and the importance it holds for the future.

4. MOUs:

The United States and India signed three agreements:

  1. MoU on mental health
  2. MoU on safety of medical products
  3. Letter of cooperation between Indian oil corporation and Exxon

How tactical is it to manage such relationships?

  • Asymmetrical partnerships are rarely easy.
  • Partnerships with superpowers are even more difficult. In international politics even the best of unequal relationships results in a loss of some dignity and autonomy.
  • Today,without the United States, the Indo- Pacific region could become willy-nilly part of a new Chinese tributary system.
  • And with a fully engaged United States, the region has at least the chance of creating a more organic rules-based order.
  • India’s “estrangement” with the United States, during the Cold War, has had consequences for vital national interests that continue to cast their shadow on the present. Jammu and Kashmir (J&K), nuclear non-proliferation, the festering of the Pakistan “problem”, the Chinese humiliation of 1962, are just a few examples.
  • But much of course has changed today. India has gone on to align itself more closely with US. Both within India and in the U.S., the consensus across the mainstream of political opinion favors stronger relations between the two countries.

Conclusion

The two governments must now strive to complete the unfinished agreements and set the course for their newly designated ‘Comprehensive Strategic Global Partnership’. More immediately, with the political backing of both leaders, negotiators must move towards the much anticipated yet elusive trade deal.

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