NEW YORK – Are Indo-US ties on the up or down? Veering off-course, or regaining balance? Careening? Or is it all a game of rolling down a slope in tandem, only to get up together with a shrug and, laugh, move on determinedly to preconceived goals.
It’s hard to tell in the era of President Donald Trump. He’s not only upended foreign policy, but turned trade relations to a hitherto new territory of uncertainty, imposing tariffs and lawsuits; even to the extent of risking making enemies out of friends.
Why does one get the feeling that behind all the bonhomie that the US has shared with India since Trump took over office, there are plenty of protectionist plots afoot to undermine India. The level of distaste and disdain, contempt, for India, has escalated sharply.
The new move by US Trade Representative (USTR) Robert Lighthizer to target India’s export promotion programs, take it to the WTO, is significant. Trump has been harping on India’s “unfair trade practices”. On his own turf, he’s clamped down hard with tariffs on the import of steel and aluminum, issued relentless work visa restrictions targeting India’s IT industry.
A statement from the USTR listed the subsidy programs they feel is unfair, and taken to the WTO: Merchandise Exports from India; Export Oriented Units, including Electronics Hardware Technology Parks; Special Economic Zones; Export Promotion Capital Goods, and a duty free imports for exporters program. The US says all of it is distorting trade in a way that allows Indian exporters “to sell their goods more cheaply to the detriment of American workers and manufacturers.”
Richard M. Rossow, Senior Adviser and Wadhwani Chair in U.S.-India Policy Studies at the Centre for Strategic & International Studies, in an interview to the Hindu, says “trade ties have historically been testy, and are getting worse (between India and US), at least from a government-to-government standpoint.” He contends the latest move by the US is different from other disputes it’s had with India, because of the attack on India’s larger policy programs.
While India is likely feeling satisfied with the US bilateral outreach to her in the Indo-Pacific region, to counter the growth of China, clarity and toughness in position on Pakistan’s cross-border terrorism, and deigned a Major Defence Partner, there’s also a persistent sense of vulnerability on trade and immigration issues, a feeling that things may escalate further, become uglier.
The Narendra Modi government cannot afford long-term Indo-US trade conflicts, which will dampen growth in India. In fact, as much as Trump is trying to please his conservative base and issuing protectionist orders, Modi is also in a quandary when it comes to the economy, the urgent need to create more jobs. It’s survival time for Modi too, with the general elections looming next year. He needs to boost and create manufacturing jobs at a frenetic pace in the country, which dried up in the wake of demonetization.
Business Standard noted that the double impact of base-erosion and anti-abuse tax (BEAT) introduced by the US government and the lowering of corporate taxes to 21 per cent by Trump are feared to have negative impact on the Indian arms of global technology companies.
“Indian MNCs will now have to explore new ways of doing business, as the impact of these changes are significant,” D D Mishra, Research Director, Gartner, was quoted as saying by the Standard.
Between 2010 and 2016, number of global companies having R&D centers in India grew from 721 to 943, according to data from Indian Brand Equity Foundation. The workforce employed by these centers is estimated to have jumped from 204,000 in 2010 to 387,000 last year.
With the onset of Trump’s BEAT, which came into effect this January, those centers’ and job numbers are going to be adversely impacted; growth likely to stall, if not recede. India needs to create at least a million jobs a month to cater to natural growth in the labor force. The government estimates it’s creating between 350,000 and 400,000 a month.
If service jobs start to dry up too in India because of restrictive US policies, then India is in trouble, with the danger of historic unemployment rates this millennium.
Milan Vaishnav, director and a senior fellow in the South Asia Program at the Carnegie Endowment for International Peace, writing an opinion column in Foreign Affairs earlier this month, entitled, ‘An Indian Nightmare: Is New Delhi Ready for the Twenty-First Century?’, says “outlines of a much darker alternative narrative are beginning to appear” for India’s growth.”
Vaishnav writes: “One where the combined forces of urbanization and demography lead not to a rich dividend but to a social disaster. This is a future in which India’s urbanization, while creating pockets of wealth creation and prosperity, excludes many more thanks to decrepit infrastructure, poor services, and inadequate opportunity. According to this perspective, India will fall drastically short of creating enough jobs to keep up with its burgeoning labor force, spurring India’s youth to cling more, not less, fervently to identity as a means of finding their way. This resort to identity markers risks sharpening ethnic divisions and fueling the growth of sectarianism.”
The US can help India a lot in its job woes, but unfortunately, it’s not happening in the era of Trump. Instead, it’s a see-saw battle between India and the US.
For India, regaining balance is critical.
(Sujeet Rajan is Executive Editor, Parikh Worldwide Media. Email him: email@example.com Follow him on Twitter @SujeetRajan1)