[Neither country is in the mood to compromise. India’s national elections are expected to begin in April, and Prime Minister Narendra Modi has struck a protectionist stance as he seeks a second term. The Trump administration continues to focus on eliminating the U.S. trade deficit, which it says stems from unfair practices by other countries, including India.]
By Joanna Slater
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Indian
Prime Minister Narendra Modi addresses the Petrotech conference
in Greater
Noida, India,
Feb. 11, 2019. (Anushree Fadnavis/Reuters)
|
NEW
DELHI — These days, the
relationship between the United States and India runs on two distinct tracks.
On matters of defense and geopolitics, the world’s largest democracies are
drawing ever closer together. But on matters of trade and economics, they
squabble like siblings.
Lately, the squabbling has taken a turn for
the worse.
After months of discussions, an attempt to
forge a deal to resolve an existing set of trade frictions has broken down.
Meanwhile, India’s government has moved ahead with a series of policies on data
storage, e-commerce and regulation of online content that have raised hackles
among U.S. businesses. And on Tuesday, national security adviser John Bolton
warned countries such as India against supporting the Venezuelan regime of
President Nicolás Maduro by buying oil from that country.
India is still smarting from the Trump
administration’s imposition of steel and aluminum tariffs and its move to
tighten the rules for H-1B visas, which are granted primarily to Indian tech
workers.
Neither country is in the mood to compromise.
India’s national elections are expected to begin in April, and Prime Minister
Narendra Modi has struck a protectionist stance as he seeks a second term. The
Trump administration continues to focus on eliminating the U.S. trade deficit,
which it says stems from unfair practices by other countries, including India.
India is still far lower on the Trump
administration’s priority list for trade punishment than, say, China, or even
Canada. But now the United States is reportedly considering withdrawing India’s
current privileges under the Generalized System of Preferences, or GSP, a trade
regime that allows billions of dollars in Indian goods to enter the United
States duty-free.
Into this picture comes Commerce Secretary
Wilbur Ross, who is arriving in New Delhi for his first official visit to
India. On Thursday, he is scheduled to confer with his Indian counterpart.
Accompanying Ross is a contingent of 20 chief executives of American firms, who
will participate in a forum with Indian business leaders. They are likely to
underline the potential to boost trade in areas such as energy and aviation.
“These are important dialogues, and it’s
important to keep them going even though there may be times when significant
progress does not seem likely,” said Nisha Biswal, president of the U.S.-India
Business Council and a former senior State Department official.
Biswal said part of the challenge on the
economic side of the relationship is that India and the United States do not
have a broader trade or investment treaty that can frame discussions. “So all
of these issues become much more entrenched,” she said. “They tend to linger;
they tend to fester.”
In recent months, the United States and India
have tried to reach a “fairly modest” agreement to resolve frictions over trade
in medical devices, agricultural goods and products such as mobile phones, said
Biswal. The failure to conclude such an agreement was “disappointing,” she
said.
Also disappointing from the U.S. perspective
was India’s surprise announcement in late December revamping the rules for
e-commerce marketplaces in the country. The move was aimed squarely at Amazon.com
and Walmart, which have made significant investments in India. (Amazon founder
Jeffrey P. Bezos owns The Washington Post.)
With tensions multiplying, the notion that
the United States could take a punitive step such as revoking India’s trade
concessions is “a very real possibility right now,” said Richard Rossow, senior
adviser at the Center for Strategic and International Studies in Washington.
The only reason the Trump administration
would not take such a measure, he said, is that it might “tilt the plate and
make it way too wobbly to make progress in other areas” — for instance,
military cooperation between the two countries.
Withdrawing India’s trade privileges under
the GSP regime would be a “really unfair reaction” by the United States, said
Navtej Sarna, who recently retired as India’s ambassador in Washington.
“We have some new policy issues on which
dialogue is needed,” including e-commerce, he said. But the United States also
needs to understand what is driving Indian policy decisions, including a fear
that companies such as Amazon and Walmart can “swallow domestic markets
completely,” Sarna said.
Diplomats and trade experts point out that
despite the areas of discord, trade between United States and India continues
to grow. A trade relationship that was formerly described as “flat as a chapati”
— India’s ubiquitous round flatbread — has risen to more $80 billion a year in
goods alone. The current frictions can be seen as a consequence of that
progress.
“Trade becomes irritating when it becomes
important,” said Biswal.
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