Unlike security issues, trade and commerce issues have substantial room for bargain and it is the willingness to discuss differences that makes the two democratic nations, India and the US, natural partners.
By Paras Ratna, Research Associate w/Strategic & Foreign Relations Practice at Rashtram
This article was published in the IPP Review
Image Source: IPP Review
Into its second term with a resounding majority, the domestically upbeat government at the center in India is experiencing international turbulence, generated by a cause not unknown — a moody United States of America. While there is nothing unprecedented about the American hot-and-cold behavior vis-à-vis India, the fact that the Narendra Modi-led government has witnessed a series of political and economic setbacks in its otherwise “natural partnership” with the US is even more unsettling.
For instance, in the month of July 2019, the Donald Trump-led American administration announced the revocation of India’s special trade status on the grounds that “India had not assured the US that it will provide equitable and reasonable access to its market”. Special trade status, which is also known as the Generalized System of Preferences (GSP), allows duty-free imports of goods up to USD 5.6 billion into the US from India. The withdrawal of such privileges, if we may, is expected to have a serious impact on India’s trade relations with the US.
Going back in time a little further, one can see that these partners have done little to confirm their natural partnership. Instead, their claims of moral association — one that is premised on the ideals of democracy, liberty, etc. — are often confronted by bitter political and economic realities. In 2018, Washington imposed tariff on steel and aluminum exported from India under section 232 of the trade expansion act of 1962 on the grounds of national security. Series of protective measures against India led to a tit-for-tat response from New Delhi where tariff of USD 235 million was imposed on the US goods worth USD 1.4 billion. Mostly apples and almonds worth USD 156 million and USD 543 million were targeted respectively. This prompted speculations of tensed/strained Indo-US relationship of which trade spat is an indicator. However, assuaging such concerns, Mike Pompeo himself at the 44th annual meeting of the US-India Business Council pointed out that “the idea of a US-India partnership isn’t new and had been in the offing since last seven decades when India got independence and therefore close relationship has always been a matter of ‘When’not ‘If’”.
He went on highlighting the advances made in Indo-US relations under the Trump administration and the need for both countries to cooperate further in the Indo-Pacific region and world at large. Same sentiments were echoed by Secretary of Defense Patrick Shanahan at the June 2019 Shangri-La Dialogue in Singapore where he hailed US-India defense relations and India as a major defense partner. However, despite these sweet nothings, it is important to ask precisely “when” India and the US will graduate from being friends with conditions to best friends forever.
Economically, where there is friction in the ties between the US and India, strategically there is a different story to tell. Recall the address delivered by Pompeo and one would not help but notice the (selective) centrality that India is assuming in America’s strategic calculus. While much remains to be said about India’s absence from the US-led peace process in Afghanistan, the matters in the East — the Indo-Pacific — look encouraging. In fact, as the recently released Indo-Pacific reportnotes, “The United States and India recognize the importance of the Indo-Pacific to global trade and commerce. Both countries share broad-based partnership, democratic values and quest for a rules-based international order”.
Unlike security issues, trade and commerce issues have substantial room for bargain and it is the willingness to discuss differences that makes the two democratic nations, India and the US, natural partners.
If one were to discount the other troubles that have beset the bilateral relations between India and the US, it can be observed that their ties have been on an upward trajectory. Interestingly enough, it is on matters of strategy and defense that these two countries have witnessed the most cooperation.
From President Clinton to President Trump, the Indo-US relationship has reached a full circle in two decades. Alignment of strategic interest has led to deeper cooperation in diplomatic as well as defense cooperation. For instance, India’s elevation to Strategic Trade Authorization-1 (STA-1) list will allow it to import high-end sensitive technologies like armed drones. Bestowing of STA-1 status can be seen as a logical step after the US recognized India as a “major defense partner” in 2016 which enabled sell of high-end technology at par with the US allies.
In fact, the year 2018 had been significant for both the countries as it witnessed key developments like inaugural of India-US 2+2 ministerial dialogue, signing of Communications Compatibility and Security Agreement (COMCASA) that will facilitate real-time information sharing between both the countries, altering the nomenclature of US Pacific Command (USPACOM) to the US Indo-Pacific Command (USIPACOM), and consensus on first tri-service exercise. These demonstrate the intent of the US and India to forge security partnership in the Indo-Pacific region. On the trade front, the American trade deficit declined from USD 27 billion in 2017 to USD 21 billion in 2018.
However, not everything is rosy on this front too. Washington’s sanction on Russia through CAATSA (Countering America’s Adversaries through Sanctions Act) has significantly impacted India’s decision to import weapon systems. It is crucial to understand that in terms of defense-industrial set up there exists path dependency as most of Indian platforms and personnel are designed and trained to operate Russian defense systems and platforms. Besides, New Delhi’s distance from Moscow could lead to it supplying sophisticated defense systems to Pakistan with severe implications for regional stability. Similarly, flaring up of tensions with Iran and Venezuela put India’s energy security at stake and it has to albeit reluctantly source from alternative options.
Like the US, India too has its red lines. Autonomous foreign policy and prioritization of national interest figures prominently in that. At a time when foreign policy is increasingly being debated in domestic politics, a government with thumping majority can’t be perceived as compromising on its national interest. As Indian Foreign Minister Dr. Jaishankar notes, “We have many relationships… they have a history. We will do what is in our national interest and part of the strategic partnership is the ability of each country to comprehend and appreciate the national interest of others”. Interestingly, this also highlights the fact that the fear of Asian NATO and subsequent return of the Cold War is misplaced, as major powers are engaging with each other with economic and strategic logic of their own.
Although differences exist on issues like trade, tariff, 5G systems, Indo-Pacific expanse, and world view, past experiences suggest these aren’t irreconcilable. Despite the huge political and bureaucratic mistrust that existed till the late 1990s, India and the US managed to overcome a lot of odds, including complex issues like non-proliferation, regional stability, and state sponsored terrorism to name a few. In fact, the Trump administration’s recent decision like giving lifeline to Huawei by allowing US companies to sell hardware components has given considerable space to India to craft its 5G policies.
Similarly, on the energy security front, the US have tried to fill the Iranian void. The latest estimates shows that while India’s import of Saudi oil grew by 11 percent that of the US grew by 34 percent. The US senate’s decision to pass resolution elevating India to the status of’ non-NATO ally further points to the growing salience of India-US relations in the Indo-Pacific. The resolution when turned into law will allow increased defense cooperation particularly in areas like maritime security and counter-terrorism. Besides, India is looking to lock defense deal worth USD 18 billion with the US. It is pertinent to note that unlike security issues, trade and commerce issues have substantial room for bargain and it is the willingness to discuss differences that makes the two democratic nations, India and the US, natural partners.
