Dr. D.K. Giri
The proposed India-USA trade deal has kicked-off a good deal of controversies across the political, academic and analyst communities. The Opposition in Parliament, which is in ongoing Budget Session, is crying foul over the deal. Their criticisms are that the deal is one sided, tilted in favour of America, India’s sovereignty and strategic autonomy are compromised, Prime Minister Narendra Modi threw in the towel by giving into Donald Trump’s diplomatic bullying and tariff tantrums.
In the last week, in this column, I had written about the proposed deal inferring that India had a strategic breakthrough with USA after a season of mistrust and bitterness, but, taking note of a chorus of criticism of the proposed deal, I am made to rethink my perception of India-US bilateralism, whether the deal is a breakthrough or breakdown for India.
Before we delve into the comments and criticisms, it is in order that we know what exactly has been agreed, and what the drill ahead is. We should be clear that no deal has been signed yet. What has happened so far is a joint announcement that the United States of America and India have reached a framework for an Interim Agreement regarding reciprocal and mutually beneficial trade; “it will include additional market access commitments …. commitment to reciprocal and balanced trade…”.
The key features of the framework include India’s commitment to eliminating or reducing tariffs on all US industrial goods and a wide range of US food and agricultural products; “the United States will apply a reciprocal tariff rate”; “India intends to purchase 500b USD of US goods and expand market access opportunities through the negotiations on the Bilateral Trade Agreement (BTA)”. The United States and India will use this framework to finalise an Interim Agreement that will lead to the signing of a mutually beneficial BTA”.
So, let us be clear that only a framework for Indo-US trade agreement has been announced. This should lead to an Interim Agreement by mid-March and later to a BTA. In other words, only a broad understanding has been reached between both countries and details will be worked out. Going by Trump’s flexibility or dynamism which many observers call fickle-mindedness, things could further change by the conclusion of a BTA. Therefore, the concerns about the deal are a bit premature.
Analyzing the criticisms, these are of three kinds. One set of criticism refers to Trump’s ‘famous’ and much-talked and mocked about personality; there are a lots of mimes and parody of Trump by stand-up comedians of the US. Like it or not, unlike many American Presidents, Trump is the most-talked about leader in his country. It is mainly about his personality and public utterances. As I have written before in this column that people talk about what Trump says, not what he does. There are quite a few charity activities Trump did even before he came to the White House which the media does not talk about; nor does Donald Trump himself.
In New York, he once built a skating arena at his own cost for the city administration. Since he comes from a rich business family, he has helped many individual and institutional causes. He gave his private jet to fly Nelson Mandela to the United States. While dealing with Trump, one has to study his approaches to public life and governance which have been consistent even before he came to politics. His focus is on economy, law and order, result-based projects and cutting deals.
Coming back to criticisms, it is argued that Trump unilaterally announced on 2 February on his Twitter handle, Truth Social at 10.42 pm IST which, condescendingly portrayed the trade deal as a favour granted to Modi as a token of friendship and respect for the latter. Narendra Modi responded on his Twitter handle roughly 40 minutes later thanking Trump for the tariff reduction. A few days later, the White House released the so-called joint statement at 5 am IST on February 7 when New Delhi was asleep – in a notable breach of diplomatic protocol on the deal. The proposed deal comes after Trump’s series of insults at India calling it a dead economy, and brokering of the India-Pakistan war, and imposing 50 per cent tariffs and so on.
The second set of criticisms talks about asymmetry of commitments. There is quite a bit of asymmetry on overall structure of the deal, tariff policy, purchase commitments, energy and geo-politics, monitoring and enforcement, Non-Tariff Barriers (NTBs), political risk in agriculture and even future negotiations for BTA. While India’s commitments are hard and monitored, commitments by USA are conditional and reversible. The third type of criticisms are on the impact of the deal on geo-politics.
It is fair to say that the criticisms are bit of an overreaction. It is true that Trump can change his mind, for good or bad for India. But Trump has been good to India in his first term. In the second, his attitude to India has been changing. Is it driven by his own thinking or India’s foreign policy? There was no US-Ukraine war in his first term. The inability of India to cut a deal, as a trade-off between India’s withdrawal of support to Russia (buying Russian oil) and getting solid support from the US vis-à-vis China and Pakistan, has also influenced Trump’s dealing with India.
While the West expected India to be a counterweight to China, New Delhi took a flight of fancy on strategic autonomy and multipolar world etc. Even now, many in the foreign policy community are critical of the West which includes the FTA with Britain, Europe and now US. Is it not a fact that China became an economic superpower with the investments from the West? India’s anti-West and pro-South approach will deliver no economic dividend for the country, not even strategic gain. One school of critics is suggesting that buying no oil from Russia will not impose economic costs but a strategic loss. This flies in the face as how no oil deal with Russia will cost India strategically. Russia is not able to trounce Ukraine, how can it extend any security support to India.
On the surface, the trade deal seems favouring the USA, particularly on elimination of India’s trade surplus and commitment to import 500b USD worth of US goods in the next five years. But it is early days, India can re-negotiate the volumes of imports and exports. Apparently, the 500b USD was agreed as the volume of bilateral trade in next five years not just India’s import from the US. One can count on Trump’s ability to change more than New Delhi’s stubbornness. Politics, national or international is an evolving process. In geo-politics, issues and individuals change faster than expected. So, treat this deal as a strategic breakthrough and build on it.
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