Setback for Make in India as US pushes for trade balance
Beyond the visual headlines made by the Trump-Modi hug and the robust language of their joint statement on terrorism, Pakistan and on defence cooperation, sits a paragraph on trade relations that could be considered a setback for India’s ‘Make In India’ ambitions.
US President Donald Trump’s insistence on cutting back the US trade deficit with India is a fraught assertion, which commentators have noted. But there is disconcertingly, more.
Usually joint statements by political leaders after bilateral visits are couched in generalities, though of late those have begun to address some clear economic concerns. That is as it should be since the details are best hammered out by the bureaucracies of the respective nations, allowing them leeway to maintain the interests of the signatory nations.
Tuesday’s joint statement between the US and India — Prosperity Through Partnership — however, departs from this script in a few respect. It is not only unequivocal on trade balance, it takes into account almost all the discomfort zones of the US business with India and demands sorting those out.
In return, it offers precious little to India, except for market access for agricultural goods. The “plan to undertake a comprehensive review of trade relations with the goal of expediting regulatory processes; ensuring that technology and innovation are appropriately fostered, valued and protected”, point to only one direction. It is that India should allow more safe harbour for US pharmaceuticals by cultivating a tight intellectual property rights regime.
For obvious reasons to ensure availability of generic drugs at low cost for the Indian population, successive governments have been uncomfortable with this demand from the US business. Just as surprising is that of allowing “increasing market access in… information technology (IT), and manufactured goods and services”.
More market access to the US companies in the IT sector at a time the US is clipping back on access of H1B visa for Indian companies, seems patently unfair. So is the concern to cut back on excess capacity in industries, which is more of a US problem than for India.
India has also made space for costly import of natural gas from Washington DC, creating a room for concern. Also, since Indian ministries have now clearly articulated a purchase preference for domestic companies, how does that reconcile with the joint statement’s stress on “review of regulatory process”?
Of course, it is worth noting here that joint statements are not a substitute for domestic legislations or even executive orders. Also, the statement has to be followed up by filing in the details in the annual US-India strategic and commercial dialogue where all these issues would be thrashed out. It is quite conceivable that Indian negotiators could pull back on some of the commitments made here. But if it is so, it is difficult to figure out what was the need for this level of detailing in the statement. Especially, as there is no escape route of referring any of the issues to a multilateral body, some things are anathema to Trump. In any case under his presidency, the US has moved away from its position that in dealing with economically less developed countries, trade deficit should not be seen as a problem. Also, since the elephant in the room is China, which accounts for $347 billion of the aggregate $500-billion deficit that the US has run up with the rest of the world, the Indian surplus is puny at $24 billion.
To compare the US-India statement, let’s look at the expanse of trade issues laid out by India in the past two years with China, Japan and Russia under the Narendra Modi government. China, for instance, has agreed to take joint measures to address India’s concern on bilateral trade. This includes tariff reduction for Indian IT industry, but a multi-lateral framework for the Asia-Pacific Trade Agreement. There is of course a nod to give more space to Indian pharmaceutical exports and “speedier phytosanitary negotiations on agro-products (but under) two-way trade”.
It is the same pattern with Russia. Despite plentiful reference to trade ties, the substantial work is limited to “cooperation through joint promotion of the Indian initiatives on eliminating non-tariff barriers in trade, increasing trade in services and structuring support and development of Micro, Small and Medium Enterprises (MSMEs) in the Brics format”.
Again note, a multi-lateral initiative.
Also with Japan it has very little tangible on trade and whatever is mentioned is peppered with reference to the Regional Comprehensive Economic Partnership, and the World Trade Organization (WTO). The issue of excess capacity in steel industry is clothed under G-20. Both agreed that the sloth lies in the “formation of the global forum on steel excess capacity as called for by the G-20 leaders”.