Trump and Modi might not have inked a trade deal during the president’s visit, but the two countries should work toward an agreement.
As the buzz about President Donald Trump’s visit to India has grown since the first of the year, there were expectations in Washington that a major trade deal with India would be signed during the trip.
With the United States concluding a modest trade agreement with China — with which it waged a prolonged and rancorous trade war — it was reasonable to think that a solid deal with a strategic partner like India might be around the corner.
That was two weeks ago, when U.S. Trade Representative Robert Lighthizer, the man in charge of negotiating trade agreements on behalf of the United States, canceled a scheduled trip to New Delhi. Lighthizer’s cancellation signaled a trade deal of any true significance is unlikely to be signed during the presidential visit.
More or less confirming that the two sides are not close to an agreement, Trump himself quashed expectations of signing a mega deal twice in the past several days. First, the President said last week that he will sign a deal if it is “the right one.” Then on Tuesday, February 18, he told reporters that he is “really saving the big deal for later on”.
On Monday, Trump arrived in India, and there will not be a trade deal during his two-day stay in the country.
This will be the second time in six months that India and the United States have tried to broker a trade deal and failed before a major bilateral visit. Last September, officials from the two countries tried to conclude a deal before the U.S. visit of Prime Minister Narendra Modi, during which he famously shared a stage with Trump in Houston
Even before Trump’s remarks, the two sides have been scaling back their ambition on an overarching trade deal and, instead, focusing on a narrow deal that would cut duties on U.S. imports, such as dairy and poultry products and in return would cut duties on selected India aluminum and steel products. But, for now, even that appears remote and raises conjecture as to whether there will be a trade deal at all during the Trump visit.
The inability of the two sides to conclude even a limited trade deal again ahead of a major summit reveals that the two countries have a long way to go on the trade front. While it is still possible that a limited deal might be signed for India to import more U.S. energy, dairy products and defense equipment, they continue to disagree on a number of issues, among them, tariffs on medical devices and mobile phones.
While Indian officials and Trump himself have said that they are not too concerned about their failure to conclude a deal, the thinking in Washington is that differences on the trade front may become a drag on the bilateral strategic ties, which have grown and prospered over the past two decades.
Overall, New Delhi has proven to be a strong strategic partner for Washington during this time period, with the geopolitical interests of the two converging on a number of areas, including China and terrorism. That is well appreciated by the foreign policy establishment.
However, when it comes to business, a section of the U.S. business community believes India has not met the United States halfway. Although trade volume has continued to increase — from a few billion dollars in early 1990s to more than $150 billion last year — bilateral commercial relations have been marked by frictions over issues such market access and intellectual property rights.
After India and the U.S. signed the historic civil nuclear deal signed in 2008, the U.S. business community hoped to land a big chunk of future defense and nuclear energy deals. Even though India has increased its defense purchases, it has continued to rely on some of its traditional defense partners such as Russia and France. In fact, the most coveted of the recent defense deals, a contract to supply dozens of multirole fighter aircraft to the Indian Air Force, went to the French giant Dassault Aviation.
Under previous administrations, trade differences had not become major irritants in bilateral relations, except during election season, as happened in 2004. But Trump, who stormed into the White House vowing to tear up every existing treaty, does everything differently.
He has already consigned to history treaties such as the North American Free Trade Agreement (NAFTA), replacing it with a new United States of America, the United Mexican States, and Canada (USMCA) Agreement. Most analysts indicate the USMCA is not much different than NAFTA – the difference is it is Trump’s deal and he can take credit for it.
Despite the President’s good personal chemistry with Modi, he and his administration has been playing hardball on trade with India from the beginning. As the trade talks continued to drag on, Washington has ratcheted up the pressure progressively, firing one salvo after another. The latest came last week, when the United States designated India as a developed country. Prior to that, it removed preferential treatment historically accorded to India under the Generalized System of Preference (GSP) program.
While Trump, who loves the big stage, is sure to appreciate the crowd size, like the one that cheered him in Ahmadabad on Monday. However, it remains to be seen whether he will be happy with those optics alone. At the moment, because he will be up for re-election in less than nine months, a trade deal with India which he can tout during his campaigning would be helpful to him.
Voters in Midwestern states, who put helped put Trump in the White House in 2016, have borne the brunt of the trade wars the President fought the past three years. Now that the China deal is on the books, Trump can go to those voters claiming that he has looked after them. Some type of deal with India regardless of its scope or substance would add to his accomplishments list.
Nonetheless, it is difficult to predict how President Trump will move forward in terms of the deal and future relations with India. This is the case because, in spite of his reputation to the contrary, Trump may not be a proficient deal-maker as Tony Schwartz his co-author (ghost writer) of the well-known book The Art of the Deal has reported on many occasions. And, as Trump’s befriending Russia and infuriating NATO allies suggest he doesn’t put the maintenance and development of strategic relations at the top of his personal to-do list.
Given all of this, the proper and prudent course for New Delhi should be to continue to work with those in the Trump administration who have spoken glowingly about the current nature of the bilateral relations. And, to stay at the negotiation table with Trump’s representatives to construct a trade deal that is fair and equitable to both sides. This will ensure that the bilateral ties between the U.S. and India stay strong and are positioned to become even more strategic and stronger no matter who wins the U.S. presidency in the 2020 elections.
(Frank F. Islam is an Entrepreneur, Civic Leader and Thought Leader based in Washington DC.)