Print This Post
20 February 2020, Gateway House

Trump’s visit: trade differences exaggerated

In the run-up to President Trump’s visit to India on 24-25 February 2020, Ambassador Neelam Deo, Director and Co-founder of Gateway House, discusses in this interview how he has made balanced trade a global issue, but given substance to the India-U.S. defence bilateral, sharpening the concept of the Indo-Pacific and the Quad’s profile

post image

Sukhmani Sharma (SS): Welcome to the Gateway House podcast. I am Sukhmani Sharma, Website Associate at Gateway House. We have with us, Ambassador Neelam Deo, Director and Co-founder, Gateway House, who will be discussing President Trump’s upcoming visit to India.

Neelam, this is the first visit to India by a U.S. president since President Obama came in 2015. How have relations between the two countries evolved since then?

Neelam Deo (ND): Thank you, Sukhmani. That’s a very big question. I will highlight only a couple of things that have happened since 2015 when president Obama was here. He was the chief guest at our Republic Day parade and that, by itself, was a signal of the importance of the bilateral relationship. Now, since the coming of President Trump, one of the things that has had an impact on the bilateral relationship with the United States – and which is of importance for American relations with all countries – is the position that his administration is taking on China. It is encapsulated in what is referred to as the U.S.-China Trade War or the U.S.-China Tech War, and both aspects are important.

To take just the U.S.-China Trade War, not only does the United States make allegations against China on the size of their bilateral deficit, on the kind of tariff measures and others that China uses to keep out goods from the United States, but that all those measures are even more true of the huge deficit that India has with China. At the same time, it also means that President Trump has been criticising India for the deficit in the U.S.-India trade, even though the deficit is barely $20 billion, which is not even 1/10th of the American deficit with China. My point is that globally, President Trump has made having balanced trade an issue.

He has also criticised other long-standing American friends and even treaty allies, such as Germany, European countries or Canada, for the same reason. He has used provisions from the World Trade Organization (WTO) to make trade deficits with the United States somehow seem like they have an impact on national security. Of course it does not: a $20-billion deficit between India and the United States is not consequential.

But the way trade is discussed between the two countries is acrimonious. As a result, when President Trump is here, there will be no agreement on trade issues. That has already been taken off the table.

The other issue is a U.S.-China Tech War: there are also strong differences between the U.S. and India on some of those issues, which we can take up later, especially in dealing with data since India’s is such a large population and the data that is gathered is of immense significance.

There are other issues which, again, can be very difficult addressing. President Trump has used sanctions as a tool of foreign policy much more than his predecessor did. Although sanctions have not been placed on India, those placed on Russia and Iran have had an impact on India’s relations with those countries. Iran had become the second largest supplier of oil to India, but we are no longer able to import it without attracting penalties from the U.S., which are of an extra-territorial nature. That’s a problem.

But in the meantime, there has been an uptick in defence relations. The Trump administration, perhaps because of its views and perspective on China, has been much more forthcoming on bilateral defence relations. It has promoted the sale of defence systems to India, which we would like to have because they are highly sophisticated and our armed forces express the need for them. This has also given more profile and substance to the concept of the Indo-Pacific. In fact, the quadrilateral grouping – that is, the U.S., Japan, India and Australia – has met at the foreign ministers’ level. That’s seriously raising the profile.

So there are new issues in the bilateral relationship since 2015. Some of them are more substantive, more complex, but because of the style of the American president, they can sound much more acrimonious than they necessarily are.

SS: Pakistan is hoping for the U.S.’ intervention at the FATF’s Plenary session, which began on February 19, to get off the grey list. What are the implications of this for India-U.S. relations?

ND: From everything we are hearing about the FATF, a sub-group has recommended that Pakistan be kept on the grey list. On Friday, I think there will be a meeting of the full group and we will see what happens. This is an issue of importance by itself – regardless of President Trump coming here or as an item in India-U.S. relations – because the world must continue to put pressure on Pakistan to curb the funding of terrorist activities, which is why it has been put on the grey list in the first place.

But there are two other issues in the context of the U.S.-Pakistan relationship. One is President Trump’s frequently reiterated desire to mediate in our differences on questions relating to Kashmir. Each time he has said this, it has made Pakistan very happy, but the government of India has made it clear that it does not welcome mediation and that we cannot revive any dialogue with Pakistan until it ends its support for terrorist activities, particularly in Kashmir.

The second is to do with all the activity in the end game on Afghanistan. President Trump is very keen to draw down American troop presence immediately, and to withdraw them actually, perhaps before his own re-election campaign comes to a head in November this year. It looks as if there will be an agreement signed between the U.S. and the Taliban. But of course, from our point of view, it’s very important that the government of Afghanistan and the Taliban come to some understanding so that violence in the country can be reduced.

It does not help that the election to the presidency in Afghanistan itself was so disputed that the result has only just been announced – months later. But at least now that that result has been announced, it looks to me like something will be concluded on this issue. It is entirely possible that President Trump, who loves to do the unexpected, may actually make a stopover in Pakistan to promote the agreement to bring an end to the fighting in Afghanistan so that American troops can be withdrawn.

SS: You mentioned earlier that President Trump has announced that he will not be signing a trade deal during his visit. What is he implying?

ND: This trade deal has been really exaggerated and given a profile it does not deserve. It refers to only a few issues, which are of interest to India, and then there are a few issues that are of interest to the U.S.

If the negotiators on the two sides had been able to come to an understanding, it would have been good to sign a small agreement. This is like ‘a sub-agreement’. But clearly, we haven’t been able to come to an understanding on all the issues: I suspect that this may have something to do with the technology aspect because when trade agreements dealt only with goods, it was easy, the definitions were clear, how they cross borders was clear. Much of the analysis and the terms of such agreements exist already, and the WTO was the body dealing with that.

But now, trade in services has become almost bigger than trade in goods. The fact is that although India exports more goods to the U.S., the United States exports a lot of services to India, as does India in the IT sector, but U.S. services are more highly priced because they are often in the financial sector: mergers and acquisitions, etc.

Then there is the whole question of the Americans having a certain view on how data is to be dealt with. They want that their own companies keep all that data in the U.S. because several of them – be it Apple, Microsoft or Amazon, etc. – operate in India.

The Indian position has not been clarified. We have not had enough legislation on it and we should proceed quickly because it’s very much in our interest – with a population of over a billion people and almost everybody now using a smartphone. A lot of data is generated all the time and this data is very valuable. It is said that data is the new oil. So we need to move on it. I suspect that we could not agree on this specific issue, which is why, on the other issues – which are, actually, of much less consequence, Royal Enfield Motorcycles, etc. – we could have arrived at some agreement.

Is it important? Of course, it’s important. It’s always good to be able to have announced some agreements. But the fact is that we won’t be announcing a trade agreement and I don’t think that the importance of it should be exaggerated.

We will, instead, announce the purchase of defence equipment. We may announce some other agreements, including on the Indo-Pacific, maybe something on the signing of the third basic agreement with the United States. We have already signed the Logistics Exchange Memorandum of Agreement (LEMOA) and Communications Compatibility and Security Agreement (COMCASA). Maybe there will be some progress on the third agreement: the Basic Exchange and Cooperation Agreement (BECA).

Yet, the importance of this visit should not be reduced to a minor trade agreement. It is important for us that the American President is visiting in his first term. We don’t know what the outcome of the elections will be, but it’s a signal to our neighbours. China will take note, Pakistan will, of course, take note and it does promote convergence on strategic matters.

Produced by Sukhmani Sharma, Aashna Agarwal
Theme by Rohan Dalal