First came a sharp attack: privileges accorded by the Generalized System of Preferences (GSP), which helped India export around $5.6 billion worth of goods annually to the US duty free, were revoked by President Trump.
Now, some balm to soothe the wound: Secretary of State Michael Pompeo in a speech this week in Washington, DC, heaped praise for India and Prime Minister Narendra Modi, terming it as “a deeply important relationship” for the US, and that he would explore greater business and bilateral ties on his trip to India later this month, because, “Modi Hai to Mumkin Hai,” borrowing a line from BJP’s sloganeering in the recent elections.
Speaking at the India Ideas Summit and 44th annual meeting of the U.S.-India Business Council, in Washington, DC, on June 12, 2019, Pompeo – who will visit India June 24-26 on the first leg of a trip to Asia, said, “our two nations have an incredibly unique opportunity to move forward together, for the good of both of our peoples, the Indo-Pacific region, and indeed the entire world.”
Pompeo delved into the history of the growth of Indo-US ties, stretching from the 1970s, when the idea of a closer relationship between the two nations “seemed inevitable”.
“But for too long – indeed, for decades – we found ourselves on different trajectories. The United States was fighting the Cold War,” he said. “And India was asserting itself, its newfound, cherished independence through its non-aligned movement, trying not to take sides. We cooperated when we could, but frankly I think most would agree that we mostly fell short of our potential.”
Pompeo talked of the ‘License Raj’ and India’s closed economy which was a deterrent to growth in business ties.
“Five-year plans became the received wisdom, something like our 2 percent growth here in the last administration became sort of a new normal. We focused our attention on other Asian trading partners, and what were once cubs grew up to be true tigers in the region,” he said.
All that changed when liberalization set in, and India thrived in the new business environment, with a steady 7 percent growth from 1997 to 2017, Pompeo pointed out.
“Millions of Indians have been lifted out of poverty. India became a world leader in IT – IT services, engineering, pharmaceuticals. U.S.-India bilateral trade reached $142 billion just last year, a seven-fold increase since 2001. Additionally, more than 500 American companies now successfully operate in India. And of course, the U.S. is a market for roughly 20 percent of India’s exports in both goods and services,” he said.
“More recently, President Obama granted India “Major Defense Partner” status, and supported India’s quest for a permanent seat on the UN Security Council – a position that the United States continues to support,” he said.
“And under President Trump, we’ve taken our defense cooperation to new heights, solidified our common vision for the Indo-Pacific, and taken a far tougher stand on Pakistan’s unacceptable support for terrorism in the region,” he added. “When Prime Minister Modi visited the White House back in 2017, he and President Trump exchanged a lot of good will and a couple of hugs.”
Without referring to the US demand for more access to their businesses and products in Indian markets – a long standing demand from Trump which led ultimately to the end of the GSP – Pompeo said that Modi himself has said in the past that “India’s interests lie in a strong, and prosperous, and successful America.
Terming Modi as “a new kind of leader for the world’s most populous democracy”, and talking of his rapid ascent in politics from being the son of a tea seller, Pompeo said the prime minister has made economic development for the poorest Indians a priority.
“And indeed, millions who once went without light bulbs now have electricity. And millions who lacked cookstoves now have them,” he said.
Pompeo has been active with India since he took office. Last year, he attended the 2+2 dialogue, along with the Secretary of Defense. He also reinvigorated the Quad Dialogue among the United States, Japan, and Australia. In his speech, he again advocated Trump’s vision for a ‘Free and Open Indo-Pacific’.
Pompeo said that the Trump administration has already enabled American companies to export more high-tech items to India, including cutting-edge defense platforms like armed UAVs and ballistic missile defense systems. They also launched the Asia-EDGE program, to help India raise private capital to meet its energy and security needs.
On the defense front, Pompeo said the first batch of Apache helicopters are coming off Boeing’s production line in Arizona, and Lockheed Martin’s F-21 and Boeing’s F/A-18 are state-of-the-art fighters “that could give India the capabilities it needs to become a full-fledged security provider throughout the Indo-Pacific.”
On the energy front, Pompeo said he’s keen to complete the Westinghouse civil nuclear project, and deliver more LNG and crude, to India.
“These steps will give Indians reliable, affordable, diversified energy independence so they will no longer have to rely on difficult regimes like those in Venezuela and in Iran,” he said.
Talking of the revocation of the GSP, Pompeo said he hopes India would “drop their trade barriers and trust in the competitiveness of their own companies, their own businesses, their own people, and private sector companies.”
He added: We’ll also push for free flow of data across borders, not just to help American companies, but to protect data and secure consumers’ privacy,” adding, “and speaking of privacy, we are eager to help India establish secure communications networks – including 5G networks as well.”
He ended the speech, saying, “As Prime Minister Modi said in his latest campaign – he said, “Modi Hai to Mumkin Hai,” “Modi makes it possible.” I’m looking forward to exploring what’s possible between our two peoples.”
In an interactive session after his speech, Pompeo again stressed upon US being a reliable trading partner for India on the energy front, a topic which has come under intense discussion because of the latter’s business dealings with Iran.
“…I think we can fuel growth in lots of places in the world, and I think India is a great example. They can have a fully diversified energy portfolio where they don’t have to rely on nations that aren’t as reliable as the United States and have good outcomes, outcomes that their business leaders can count on, and frankly that Americans thinking about investing in India can count on as well,” he said.
Despite the upbeat speech by Pompeo, friction between India and US on the trading front has escalated sharply under the Trump administration. Trump has repeatedly termed India in his speeches as an ‘unfair’ trade partner.
RT.com reported that the two countries have also locked horns over India’s decision to ink an estimated $5 billion deal with Moscow to purchase S-400 anti-air systems. Since then, the US has been pressing India to buy American equipment instead, offering Patriot and THAAD missiles as an alternative. Washington has repeatedly threatened to impose sanctions on India to prevent the sale from going forward.
New Delhi has dismissed the threats, stating that it would not be told what to do and “follows an independent policy.”
The Financial Times, in a report this week, said the end of the GSP though not a devastating blow to India — the US imported a total of about $83bn worth of goods and services from India in 2018 — the move is symptomatic of a hardening attitude by Washington towards its putative strategic partner, amid mounting US frustration at the protectionism and unpredictability that make India a notoriously tough market.
“The White House wanted to send a signal to the new government that they are not messing around,” Milan Vaishnav, senior fellow at the Carnegie Endowment for International Peace, who called the timing of the move “incredibly tone deaf”, was quoted as saying by the Times.
“If Trump continues down this path, he will take this relationship back by 15 years,” Sanjaya Baru, a distinguished fellow at New Delhi’s Institute for Defence Studies & Analysis, was quoted as saying by the Times. “After a long period of distrust, we were able to establish a relationship of trust. But that relationship of trust is now under pressure.
“It’s not about individual policy changes,” Baru added. “The issue really is getting him to understand our concerns. How can you be a strategic partner if you don’t understand our problems?”
Alyssa Ayres, a senior fellow at the Council on Foreign Relations, said Washington did not allow these grievances to overshadow its longer term vision of a stronger defence partnership, reported the Times.
“India is a large democracy that can, given its own interests, serve as a balance to China,” she said, reported the Times. “We have very significant interests in developing a stronger relationship with India. So, we should continue to work on these market-opening issues, but we shouldn’t break the relationship over them.”
Market Realist, in a report on the fallout of the US-China friction, however, analyzed this week that the trade war may actually see positive development regarding FDI in the defense sector in India.
“As tensions increase between the US and China, India may get closer to the US. Amid the camaraderie between China and Russia, the US will likely want India to emerge as a regional force given its scale. Thus, a prolonged trade war may see more investments flowing into India’s defense sector if bureaucracy moves to make it happen,” said the report.
Between 2014 and 2018—during Modi’s first term—India imported $13.9 billion worth of arms, making it the world’s second-largest importer of arms. With $16.9 billion worth of arms imports, Saudi Arabia was the largest importer of arms during the period. Russia was the biggest exporter of arms to India with a 58% share, while the US was a distant third with a 12% share during the period, reported Market Realist.