Closer ties with Washington won’t bring US manufacturing investment to India
As US President Donald Trump and some US political elites talk up a vision of IndoPacific cooperation, Washington may want to make a gesture to convince New Delhi that the two countries have strong economic complementarity, but what the Trump administration can offer may be just lip service.
US ambassador to India Kenneth Juster was quoted by media reports as saying recently that India can become an alternative investment hub in the Indo-Pacific region for US companies that are downscaling their operations in China. This reflects Washington’s wishes, but it will be hard to realize.
The market, instead of Washington’s geopolitical strategy, is the decisive factor that determines where US companies invest.
The US ambassador to India has little influence among Americans in industrial and commercial circles.
Realistically speaking, Juster’s words will be no more important than suggestions from reputable consultant firms in terms of outbound investment by US companies.
Since reform and openingup began in 1978, many US corporations including famous names like Apple and WalMart have invested in China. The main reason why China is now a vital overseas market for US companies is that they can make a profit by investing in China.
This investment is being driven by economic benefits, not Washington’s strategy. As China emerges as a major power, political friction with the US may also more frequently jeopardize bilateral ties, but US companies will not withdraw their investment from the country just as Washington wants them to do so.
There is no denying that some low-end manufacturers are decreasing their investment in China, where rising labor costs have squeezed profit margins.
But many of those companies view Vietnam, not India, as an alternative destination. For instance, some US shoe and handbag brands such as Nike are transferring the bulk of their orders to Vietnam to avoid rising labor costs in China. Washington cannot change this trend based on its wishes.
If India wants to compete with Vietnam for transferring industries and foster a modern manufacturing system, it must urgently improve its business environment to ensure foreign companies can make a profit. India will be fooled if it believes closer ties with Washington can bring US investment. Gestures by US political elites amount to merely a strategy to provoke more disputes between China and India.