Hope floats for India-US economic ties

Sushma Ramachandran

Senior Financial Journalist

The king is dead, long live the king! For the world’s biggest superpower, a change of guard has taken place. Now that Joe Biden is the man in charge, world leaders, including Prime Minister Narendra Modi, are preparing to engage with the new US administration. The initial congratulatory comments indicate that this country is bound to continue underlining the Indian ties of the new Vice President-elect. The presence of Kamala Harris may not make much of a difference in the overall India-US relationship, but has considerable symbolic value.

India-US ties have grown vastly over the past few presidential terms. There has been a lot of hoopla surrounding grandiose events like Namaste Trump earlier this year, but Modi’s personal chats with the then President Barack Obama in a garden were also hyped in the media. Further in the past, the then Prime Minister Manmohan Singh warmed up to George Bush and famously assured him that the Indian people loved him. But the personal rapport of heads of government has been just one of the factors contributing to the strengthening of strategic and defence ties. More important has been the coinciding of self-interest on both sides, whether it is America First or India First.

Economic relations, on the other hand, have remained a contentious issue between the two countries, in this case, due to a conflict of self-interest. Notwithstanding the rise in overall bilateral trade flows to $92 billion, there have been many hiccups during the previous administrations. The scenario worsened during the Trump era, culminating in the withdrawal of the decades old Generalised System of Preferences (GSP) benefits to India. A free trade agreement has also been stalled for years now. Other irritants include asking India to stop importing crude oil from Iran and instead making up for these supplies by buying American crude. The Chabahar port project in Iran has also suffered due to US sanctions despite a waiver given by the Trump administration since the sanctions make participation difficult for international companies. The long standing H1-B visa regime has been disrupted, leading to hurdles in the way of Indian tech companies in meeting the needs of their American clients. And this, in turn, impedes the flow of critical software exports from this country.

Most of these issues may not be resolved in a hurry by the Biden administration, given the need for it to continue the focus on the domestic economy in view of the pandemic and its fallout on jobs and businesses. But there may be one area where there could be greater consonance in the thinking of the two countries. And this is in the revival of multilateral institutions like the World Trade Organisation (WTO). India, along with other developing economies, has relied a great deal on the WTO’s dispute settlement mechanism for dealing with numerous tariff issues.

The US has also done so in the past, but lately has not just ignored the WTO, but refused to cooperate on funding or major appointments. One reason is its dismay over rulings by the appellate tribunals. It is generally expected that Biden will give greater importance to multilateral institutions, whether in the strategic sphere or in the economic arena. In case he brings a greater commitment to the WTO, it could mean a revival of this institution and bringing about an era where countries could rely on a multilateral rule-based trading system. As a result of the WTO’s decline, most countries have put their trust in regional trading blocs like the Regional Comprehensive Economic Partnership (RCEP). India is at a considerable disadvantage right now as it has walked out of RCEP, but is not yet part of any other significant regional grouping. It has entered into some bilateral free trade agreements with ASEAN and Japan, but these have not had the expected positive outcomes.

The other significant area where India and the US can jointly make a mark is on tackling of the coronavirus and ways to distribute the vaccine. In fact, President Trump and Prime Minister Modi had a dialogue early on in the corona crisis on supplies of medicine and ventilators. Hydroxychloroquine shipments were sent to the US at a time when this drug was considered a possibility to counteract the virus. In turn, ventilators were supplied to India. Now, the challenge is different. The need is to ensure that vaccines made by multiple companies are made available to the entire world. With the US President-elect having set up a Covid task force, making it clear that this is top priority, the two countries should ideally collaborate in ensuring vaccine distribution is equitable, especially as India will be a major production hub.

As for the question of whether human rights will now be linked to trade and economic issues by the Biden administration, it should not be considered an obstacle in any way. Non-trade issues have often been raised in the past by the US trade representatives. Even in the run-up to the formation of the WTO, the US would try to include wage and labour issues while discussing intellectual property rules. So, this is par for the course as far as India’s trade diplomats are concerned.

The real clash is going to be over policies of self-interest now being followed aggressively in both countries. Whether it is America First or Atmanirbhar Bharat, the theme is a similar one. At a time when both India and the US are trying to overcome the economic fallout of the coronavirus pandemic, the need to preserve jobs and manufacturing units will be of paramount concern. The time may thus not be right for a trade deal.

But it could be the right time to raise India’s concerns over issues that may have been summarily dismissed by the Trump administration. These include withdrawing tariffs on steel and aluminium exports and reviewing the withdrawal of GSP benefits while taking on board concerns over visas, the expansion of e-commerce and the sensitive issue of data localisation and privacy. It may not be a scenario of complete bonhomie, but earnestly engaging with the Biden administration could surely revive moribund economic ties.