India has been under pressure from US trade negotiators starting from 2018 when the US levied global tariffs of 25% and 10% on steel and aluminium, also affecting India.
By Anil Wadhwa
Fresh from his impeachment acquittal in the US Senate last week, US President Donald Trump will pay his maiden visit India from 24-25 February 2020. Melania Trump will accompany him for a hectic programme in Ahmedabad and New Delhi, which will include a public event at the Motera Stadium in Ahmedabad, where 150,000 people are expected to turn up. Indo-US relations have seen an all-round upswing over the past few years, including trade, investments, defence, counter-terrorism, energy, coordination on regional and global issues as well as people to people exchanges. US is India’s largest trade partner, having invested US$30 billion into India. India has also invested US$ 11 billion into the USA. Around 200,000 Indian students study in the USA, contributing $6 billion as tuition fees for the US universities. The visit of Indian foreign and defence ministers to the USA for the second edition of the 2+2 ministerial dialogue in December 2019 had seen the signature of the Industrial Security Annex (ISA) and three agreements under the Defence Technology and Trade Initiative to secure technology transfer and co-production of critical technologies. Also signed on this occasion were agreements related to exchange of parliamentarians, cooperation in space situational awareness, science and technology, water and people to people interactions. Trump’s forthcoming visit has raised expectations that the two countries could work out a limited trade agreement which US negotiators believe should bring down Indian trade surplus with the US.
In any case, this surplus has narrowed down drastically over the last two years, with bilateral trade jumping to $160 billion in 2019 compared to US$142 billion in 2018 mainly due to Indian energy imports from the USA. India’s carrier Spice jet has ordered 200 planes from Boeing, and once deliveries kick in, the statistics of trade will go up drastically. The current US administration under Trump has been pressing India to reduce tariffs to bridge this narrow trade gap, even as Indian side has argued that it has ramped up purchases of US energy and many defence purchases are in the pipeline.
India has been under pressure from US trade negotiators starting from 2018 when the US levied global tariffs of 25% and 10% on steel and aluminium, also affecting India. On June 5, 2019, US withdrew GSP preference accorded to Indian goods, affecting $6.3 billion worth of Indian exports. On 16 June 2019, India retaliated, by levying additional duties on 28 US products and was promptly dragged by the US to the WTO. The US has been pushing for lower duties and market access for medical devices, information and communications technology goods like smartwatches and iPhones, Harley Davidson motorcycles, market access for its dairy products and almonds. India would like to see its GSP beneficiary status restored and also be able to get market access for its fruits like grapes. Just ahead of the visit, however, the US this week removed India from its list of developing countries that are exempt from investigations into whether they harm the US industry with unfairly subsidized exports. India was removed from the list since it is a G 20 member and has a share of 0.5% or more of world trade to be classified as a developing country. The move has jeopardized India’s ability to ask for restoration of GSP benefits. A delegation from the US Nuclear Energy Institute will be in India before President Trump arrives, and discuss policy support for US nuclear exports to India, besides promoting US products and services to Nuclear Power Corporation of India ltd and other potential customers.
If there is a chance of a mutually the satisfactory limited trade agreement, over the next few days USTR Robert Lighthizer could be in India for its finalization, continuing the meeting of the two sides recently on the sidelines of the World Economic Forum in Davos. It is possible that India will cut back duties on high-value US agricultural goods in a step by step process, and allow a trade – margin policy for specific high – value medical items like coronary stents, although talks on market access issues for automobiles, engineering, and technology goods may continue. There are also reports that India was considering allowing US wines and whiskey easier entry into India at lower rates, but will need to protect its dairy sector, and was likely to maintain price caps on medical devices, including heart implants. India’s leading gas importer Petronet and US LNG developer Tellurian are expected to convert the $2.5 billion MOU already signed earlier into an agreement to invest in the proposed Driftwood LNG export project in Louisiana and get rights for up to $5 million tonnes of LNG a year.
Defence Cooperation will be an important component of the agenda during the visit. Since 2007, India has bought equipment worth the US $ 17 billion from the US. Both countries have moved on to sign key agreements of secure communication and sharing of military logistics like Logistics Exchange Memorandum of Agreement (LEMOA), Communications Compatibility and Security Agreement (COMCASA) and are moving towards the signature of the Basic Exchange and Cooperation Agreement (BECA) for geospatial cooperation. These agreements open up the possibility of joint operations in the future. Ahead of the visit, there are reports that the Indian Cabinet Committee on Security may approve a $2.6 billion dollar purchase of 24 MH – 6OR Seahawk helicopters with radars, torpedoes and Hellfire missiles for the Indian navy as well as 30 MQ9 Predator drones for the three services. Also, under discussion will be the modalities and pricing of Indian purchase of an Integrated Air Defence Weapon System comprising Sentinel radars and Amraam missiles, the sale for which was approved this week by the US State Department. Last year, the US had approved the sale of 30-armed Guardian Drones to India worth US$ 2.5 billion. Over the next year, India is also looking to acquire 13 units of 127 mm calibre ship-mounted guns for the navy for its destroyers, another 6 Apache helicopters for the Indian Army, and 6 additional Boeing P8 I maritime patrol aircraft for enhancing the Indian navy’s capabilities in the Indian ocean. India has already procured the C 17 Globemaster and C139J Hercules transporters, the Apache and Chinook helicopters among other equipment from the US. The US is keen to supply its F 21 as well as F/A 18 Super Hornet planes for the Indian air force and navy. India is keen to move quickly on the establishment of Maintenance Repair and Overhaul (MRO) facilities in India for US platforms.
Taking forward India’s Indo Pacific Oceans Initiative, announced by PM Modi at the East Asia Summit on 4 November 2019, India will look to move on cooperation with the US in creating a safe, secure and stable maritime domain; safeguarding the oceans including from plastic litter; build capacity and fairly share resources; reduce disaster risk; enhance science; technology and academic cooperation, and promote free, fair and mutually beneficial trade and maritime transport. The definition of employment and speciality occupations under the H1 B visa and its impact on the Indian IT industry is likely to figure during the visit and India will continue to stress on the importance of the contribution made to the growth and development of the US economy by highly skilled Indian professionals. India will need to make use of this opportunity to once again appraise President Trump of cross border terrorism in the region, and the need to keep the Indo Pacific safe, secure, free and open and to this end coordinate a future course of action with the United States as a steadfast partner.
Ambassador Anil Wadhwa who has contributed this article has served as Secretary (East) in the Ministry of External Affairs and is currently a Distinguished fellow with the Vivekananda International Foundation.