Trade issues new bugbear of foreign policy?

Meanwhile, in what has been construed as a veiled warning, former Chinese Ambassador to India, Luo Zhaohui, said India’s participation in the Belt and Road Initiative (BRI) would be “key” to solving New Delhi’s concerns over its ballooning trade deficit (

The integrated-government approach is fast becoming the template for the Narendra Modi government 2.0, with problems no longer being confined to silos of individual ministries but a more concerted approach for swifter resolutions. This has had a difficult fallout for the Ministry of External Affairs as trade issues have become the major policy concern with which it has been grappling over the past few months, with not only the United States, but also China, India’s other major trading partner, turning the screws. The worry is that progress on other strategic issues is being negated by increasing wrangling on transactional trade issues, with the MEA facing the flak.

So much so that the visit of US Secretary of State Mike Pompeo to India, to “reengage and review the status of the relationship,” as former Indian envoy to Washington Meera Shankar characterised it, ended up with the differences on trade issues, Iran and terrorism and even religious freedom being more in focus than the convergences.

Not only has Washington withdrawn the GSP (generalised system of preferences) for Indian products but US President Donald Trump tweeted that India must withdraw tariffs against US items, right after his Secretary of State left India, and before his own meeting with Modi on the sidelines of the G-20 summit in Osaka.

Retaliating to the withdrawal of GSP for Indian products, India announced duties on 28 US products, to which Trump responded, tweeting, “I look forward to speaking with Prime Minister Modi about the fact that India, for years having put very high tariffs against the United States, just recently increased the tariffs even further,” adding, “this is unacceptable and the tariffs must be withdrawn!”

India’s trade surplus with the US is relatively small, around USD 24 billion and gradually decreasing as it consciously increases oil purchases, compared to Washington’s deficit of USD 379 billion with China, with which it has a trade standoff.

Asked about trade issues, Pompeo said “disagreements occur” between “good friends” while External Affairs Minister S Jaishankar said the bilateral strategic partnership is “based on deep and broad convergences which have been steadily growing,” and “we are committed to making it easier to do business.”

However, this escalating rhetoric and actual trade differences are overtaking the other convergences, giving MEA officials nightmares as they desperately look to salvage at least a civilised meeting between Trump and Modi at Osaka.

Meanwhile, in what has been construed as a veiled warning, former Chinese Ambassador to India, Luo Zhaohui, said India’s participation in the Belt and Road Initiative (BRI) would be “key” to solving New Delhi’s concerns over its ballooning trade deficit (over USD 60 billion) with Beijing. Luo has been promoted to China’s Vice Minister of Foreign Affairs, with India as part of his remit, leading to concerns.

Chinese President Xi Jinping, whom Modi met in Osaka, seeks to intensify China’s “Closer Development Partnership” with India, placing its reservations about the BRI in focus. Beijing and New Delhi have begun discussions to initiate a ‘2+2 Dialogue’ (like India has with Japan and the US) between the foreign and defence ministers of China and India. But New Delhi will be negotiating a tightrope because any such initiative will be strategic in nature, while Xi’s development partnership message has an economic focus. India cannot be part of the BRI, but needs to cut its massive trade deficit with China.

Trade was not the only irritant during Pompeo’s visit. His description of Iran as the “world’s largest perpetrator of terrorism worldwide” has left Indians seething. While the Trump administration has moved in many ways to curb Pakistani intransigence on terror, including listing Masood Azhar as a global terrorist, India is angry with the shift in focus from Pakistan to Iran as the fountainhead of terrorism. Despite accommodating Washington by cutting energy ties with Tehran, Indian officials feel categorising Iran as the biggest purveyor of terrorism worldwide is misplaced and only aimed at brokering a deal in Afghanistan, where it needs Pakistani assistance to bring the Taliban aboard. India has no doubts about where the roots of Terrorism Inc. lie and, during his meeting with Pompeo, National Security Advisor Ajit Doval minced no words about Pakistan.