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India-US Bilateral Trade Treaty: The Time is Now

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As the Trump administration replaces multinational trade treaties, like the Trans-Pacific Partnership and North America Free Trade Treaty, with bilateral ones, US lawmakers are calling for an India-US bilateral trade treaty. Ed Royce, Chairman of the House Foreign Relations Committee, told a visiting delegation from Vivekananda International Foundation in New Delhi that India and the US agreed on liberalizing trade further, and a bilateral treaty could be the next step.

Soon after his inauguration, Trump began immediately exploring bilateral trade with Britain, Japan and Canada. India already has bilateral free trade agreements with ASEAN (ASEAN–India Free Trade Area). Negotiations with the European Free Trade Association and Canada are stalled over how to resolving commercial disputes, foreign companies demanding more flexibility and less government control.

The foundations for good economic relations with the US have been laid. India’s top exports to the US are manufactured goods, chemicals, textiles and information technology (IT) services. US-India bilateral trade grew rapidly along with India's economy after 1991, when India joined the West's neoliberal reform agenda, promoting private over public development and encouraged privatization, in line with US policy. Bilateral trade in goods and services increased from $29 billion in 2004 to $95 billion in 2013, stimulated by Obama's visit in 2010 to sign trade and investment deals, and promote great civilian nuclear cooperation. Bilateral trade crossed the $100 billion mark in 2014.

Unlike US trade with China, there is more of a balance of imports and exports. Unlike Mexico, there is no problem of illegal immigrants. In the 1990s legal status was granted to to illegals, including many Indians, who brought their families in a 'third wave' of migrants. There are 3 million Indian Americans, who are among the top wage earners among ethnic minorities in the US and strong have a strong lobby group on Capitol Hill. They add an extra support for closer economic ties.

India's biggest plus is innovation. India has a huge base of trained scientific manpower and entrepreneurial skills, "honed in adversity", and a reputation for "frugal innovation", 'Indovation', which prompted the University of Toronto to establish an India Innovation Centre. USAID chose India's Mark II hand pump as an important part of its work in Africa. India also has close links with Canada, which will make India-North America relations a three-way undertaking.

Problems looming

In Pax Indica: India and the World of the 21st Century (2012) Shashi Tharoor warned about the spectre of 'America-first'ism in the US, long before Trump used it to sweep to power in 2016. Tharoor warned that the US was already suspicious of economic policies it traditionally advocated--free markets, trade, immigration. If US turns inwards, India will have to show that it will be an asset to a US aiming to reassert its position of dominance in the world, something that reverses the current drift towards multipolarity and away from a world dominated by one superpower.

Neoliberalism claims to lead to blanket economic growth, but it is growth in the hands of large western corporations, which demand favorable conditions for commercial conflict resolution. US firms want exemption from Nuclear Liability Law, keeping in mind the Bhopal disaster in 1984 where almost 4,000 died, requiring Union Carbide to pay $470 million in restitution. Western companies want Foreign Investment Promotion and Protection Agreements which puts state legal powers in the hands of 'independent' international arbitration committees, which India is reluctant to accept.

The US is not a reliable supplier of military hardware, liable to change its mind. India wants more reliable joint production arrangements, which US firms and the government don't like. US has restrictions on high tech items. India’s request for unarmed Guardian drones for maritime surveillance was given a green signal by the Obama White House, but has been stuck in the US bureaucracy. These issues prompted India to cancel a proposed deal on US fight planes worth $10 billion in 2011 (the French firm Rafale won). In contrast, Israel, a close US ally, has now become India's largest source of military items.

The US is traditionally insensitive to other nations, demanding compliance with US foreign policy interests, which puts India in their sights on Iran sanctions. India already imports and processes Iranian gas, and would like to expand its economic relations with all central Asian states. The proposed Iran-Pakistan-India pipeline would help reduce India-Pakistan tensions, and would benefit all three countries, but is opposed by the US. The US-favoured pipeline through Afghanistan to Turkmenistan would be far riskier and have no such regional benefit, but meets the narrow interests of the US.

The US also has less clout these days. George Bush convinced the Nuclear Suppliers' Group to give India unofficial membership, but  the NSG refused India's application last year to become a full-fledged member. Similarly, Obama approved India's bid to join the UN Security Council as a permanent member, but China effectively vetoed it.

Trump's mistaken dismissal of global warming, his enthusiasm for coal, reinforces those in India who want to expand electricity production using coal. Trump's US is by no means a model for India to follow. As Tharoor states, "When it comes to pollution, we are all downstream now."

Rather than looking to the US on long term economic policy, India can use the experience of Germany, which ended its nuclear energy programme and turned to solar and wind energy, now fulfilling 30% of its energy needs via renewable energy, creating  jobs and generating export markets.

China, Pakistan

China is more important to the US than India, though more as a creditor, given China's huge holding of US debt in the form of Treasury bills. Though US politicians grumble about China as a geopolitical threat, the first stop of US presidents is Beijing. Before his day in New Delhi in 2010, Obama made a 4-day visit to China in 2009, calling Beijing the key to "peace, stability and development in south Asia".

Apart from the dispute with Pakistan over Kashmir, India is seen as the most peaceful of nations. But Pakistan has traditionally been a close US ally, in Cold War days, flaunting its anti-communism, and from 1979 on, as the key to US geopolitical strategy in central Asia. With the collapse of communism, this alliance should have lapsed, but the blowback from supporting the mujahideen in Afghanistan (and inevitably, Pakistan) has meant war and chaos which has become global, and keeps Pakistan at the centre of US geopolitics. Hence, Pakistan's claim to Kashmir is given support, and the stand-off there has left otherwise peaceful India in what can best be described as a permanent state of war with Pakistan. The problem continues to hinder better relations with the US.

Perhaps this is an issue that the innovative Trump will tackle. Republican Senator Dan Sullivan called for joint military operations by India and the US “in areas of common interest.” The Senator mentioned this in the context of Afghanistan and Pakistan. The proposal for Indian boots on the ground alongside the US has gained currency since the Trump administration took office.

Trump wants peace and development for the US, presumably for the world, as does India, so this is an incentive for closer ties. Trade is the best 'soft power' for a country to project in the world, one that makes war less and less viable. Combined with India's peaceful foreign policy, this could lead to a new development, a positive influence by peace-loving India on a sabre-rattling US.

Apart from concerns about the need of both countries to mitigate economic growth's effects on environment, there are other issues of mutual concern: piracy on the high seas, human trafficking, outer space, cyberspace. India can be a good force to moderate Trump. There is no real clash of interests. But in its policies towards the US, India will have hard decisions to make that unavoidably touch on delicate political issues. There is no simple way to make a clear distinction between economics and politics.

While India is one of the fastest growing economies in the world -- 7.6% in 2015 -- little of this goes to the majority of Indians, who still live in the countryside. The neoliberal economic model calls for lower taxes, an end to subsidies that benefit the poor, and more freedom for business, which favours city over countryside, the rich over the poor. While per capita growth is positive, India has one of the most unequal income distributions in the world. A free trade treaty with the US will no doubt stimulate overall economic growth, but it is not an economic silver bullet, and will require social policy to make sure that more growth helps Indians across the board.

Diplomatist, Volume 5 Issue 4 April 2017

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Canadian Eric Walberg is known worldwide as a journalist specializing in the Middle East, Central Asia and Russia. A graduate of University of Toronto and Cambridge in economics, he has been writing on East-West relations since the 1980s.

He has lived in both the Soviet Union and Russia, and then Uzbekistan, as a UN adviser, writer, translator and lecturer. Presently a writer for the foremost Cairo newspaper, Al Ahram, he is also a regular contributor to Counterpunch, Dissident Voice, Global Research, Al-Jazeerah and Turkish Weekly, and is a commentator on Voice of the Cape radio.

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Eric's latest book The Canada Israel Nexus is available here http://www.claritypress.com/WalbergIV.html