India US Trade War

According to leaked information of a high-level meeting, the United States and India’s failure to reach a long-expected trade deal on Sept. 24 has sparked fears of a full-fledged India US trade war.

India US Trade War
India US Trade War

Failed Negotiations

On Sept. 24, U.S. Trade Representative Robert Lighthizer and Indian Commerce Minister Piyush Goyal met on the sidelines of the U.N. General Assembly, raising expectations that the two sides were poised to reveal a new trade deal following months of talks. But according to information leaked from the meeting as reported by Stratfor, the negotiators failed to agree on Indian concessions on information and communication technology, dairy, pharmaceuticals, agriculture, e-commerce, and data localization — in short, every bone of contention that have stymied an agreement for months. Still, U.S. President Donald Trump told visiting Indian Prime Minister Narendra Modi the same day that they would be able to announce a trade deal soon.

Tariff King

India, which is the tariff king — they called us, and they say, “We want to start negotiations immediately.” When Bob Lighthizer said, “What happened? He would never do this.” They said, “No, we want to keep your President happy.” Isn’t that nice? Isn’t that nice? It’s true. They have to keep us happy because they understand that we’re wise to what’s been happening.

India charges tariffs of 100 percent. And then, if we want to put a tariff of 25 percent on, people will call from Congress: “But that’s not free trade.” And I’d look back to people; I’d say, “Where do these people come from? Where do they come from?”

Remarks by President Trump on the United States and India tariff issue.

In the absence of a deal, both countries will retain high tariffs against each other. In June, Trump revoked India’s tariff benefits under the Generalised System of Preferences after receiving complaints from the U.S. medical devices and dairy sectors about difficulties in accessing the Indian market. That move prompted India to institute tariffs in June against 28 U.S. goods, hurting apple exporters from Washington state and almond exporters from California, among others.

The Investigation

New Delhi wants to clinch a trade deal to allay its fears of fomenting a bigger trade dispute that could draw an investigation under Section 301 of the Trade Act of 1974, bring even higher tariffs on Indian products that, potentially, would involve a wider range of goods. However, India is unlikely to agree to any deal if it involves every trade issue that has split the countries for months. As a result, the two sides will continue to plug away in talks as Trump searches for some sort of trade victory to tout on the campaign trail ahead of next year’s presidential election.

Defense Technology and Trade Initiative

At the heart of the Indo-US Strategic Partnership is what is known as the Defense Technology and Trade Initiative or DTTI. DTTI was launched in 2012 with Secretary Leon Panetta appointing the then Deputy Secretary of Defense Ashton Carter to lead the ambitious initiative “to pursue four pathfinder DTTI projects for possible co-development and/or co-production, as well as cooperation on aircraft carriers and jet engine technology”.

Seven joint working groups were also launched with the yearly meetings to take place alternatively in the two countries.

Load Bearing Pillar

By all accounts, the defence partnership is the engine of bilateral ties — the “load-bearing pillar”, to quote Joshua White, a former administration official. But how solid is that load-bearing pillar in reality? Insiders say that contradictions, confusion, a mismatch of supply and demand and a lack of clearly defined objectives have restricted progress.

Jet-engine Working Group Shutdown

At its last meeting in July (2018), DTTI’s jet engine working group was shut down for lack of progress. They chose to call it a “strategic pause”. Apparently, the divergence between what India wanted and what the US and General Electric were willing to offer was too wide.

It’s obvious that GE will not part with its crown jewel having spent billions in R&D. As someone said, “it’s the one thing the company has”. GE executives saw it as a compromise of their intellectual property to even suggest improvements in an indigenous Indian engine (Kaveri). Differences also emerged because the US wanted a measure of where India was in terms of indigenous engine technology. India was not keen on open access and benchmarking.

Four Pathfinder Projects

The four ‘pathfinder’ projects envisioned by DTTI were:

  1. Next-generation Raven Mini UAVs (rejected by Indian Army as being low-tech)
  2. Roll-on and roll-off kits for C-130 (not moved forward)
  3. Mobile electric hybrid power source (closed)
  4. Protector kit against chemical/bio/nuclear fallout (closed)

To add to the gloom, the India Rapid Reaction Cell set up by Pentagon to fast-track DTTI projects has been downsized.

Trade Deal to Trade War

Bilateral trade, which totaled $142.1 billion last year, remains the major friction point in the U.S.-India relationship. India exported $83.2 billion worth of goods and services to the United States and imported $58.9 billion, resulting in a $24.3 billion surplus. Trump, pointing to the imbalance, has singled Modi out in the past as the “tariff king,” demanding that New Delhi reduce its trade surplus with Washington and lower tariff barriers for American commerce in India.

Carla Hills
A US Trade Official, Carla Hills, had once triggered a massive outrage by calling Indians thieves and criminals. “Fingerprint all the Thieves and Criminals” she said. So are Indians the thieves of Karla Hills? Excerpt from the book India in Cognitive Dissonance

The US imposed on India an additional tariff of 25% and 10% on import of steel and aluminum products in March last year. In April, a Congressional Research Service brief on US-India trade relations noted, “Bilateral tensions have increased over each side’s tariff policies.” Then, on May 31 – the day after the inauguration of NDA government to start its second term – the Trump administration announced that it was terminating India’s participation in the Generalized System of Preferences (GSP) which allows eligible developing countries to import to the United States duty free. Last year, the GSP accounted for approximately $5 billion of the $83.2 billion in imports India sent to the US.

In response, the government of India imposed retaliatory tariffs on 28 products originating or exported from the US with effect from 16th June this year. India is expected to get an additional $217 million of revenue from the retaliatory tariffs. This tit-for-tat created substantial tension in the India-US relationship going into the G20 Summit.

Indian Retail Apocalypse

Last year the Indian Cabinet approved key changes in India’s foreign direct investment (FDI) policy by allowing 100 percent FDI (from current 49%) under automatic route for single brand retail trading and construction development paving the way for unfair exploitation of traditional businesses by global players. During April-September, 2017-18, FDI inflows grew 17 percent on year at USD 25.35 billion. In the financial year 2016-17, total FDI inflows hit an all-time high of USD 60.08 billion, as compared with USD 55.46 billion a year ago.

While India is opening up its markets to be developed by borrowed foreign investment there is a fundamental question that remains to be answered or rather even asked by experts. While the Western European countries are themselves still reeling under the pressure of the 2008 financial crisis that shook not just their economic but societal and even security foundations and brought them to the verge of bankruptcies; where would all these FDI investment monies come from? This simple question if answered would lay bare the entire charade of Foreign Direct Investment in India as well as the American Dream. It is really amusing that none from the entire 1.3 billion population of India has been able to ask this humble question.

Round-Tripping Black Money as FDI

We were told that demonetization – India’s War on Cash – would combat the black economy and also crack a whip on the funding sources of terrorist outfits by curbing the circulation of Fake Indian Currency Notes. Far from it we are again in the midst of mindless terror acts and our currency notes itself printed by foreign companies blacklisted for being a threat to India’s security. What we were not told about the black money however, was that while Indian govt. was cracking a whip on the informal economy the actual black money was already being routed back into India legally via FDI (now rubber stamped by foreign corporations).

While this is the current state of the Western European economies, it is a tragedy that Indian policy makers are blissfully ignorant or purposefully conniving to download this now defunct American Dream into India either by tricking the populace through outright bluff and bluster of sloganeering or in many cases oppressively against the will of its own people.

FDI will bring back East India Company Raj

“FDI in retail will bring back East India Company regime” said the current Indian government few years ago when it was in opposition. It is worthwhile to note that patriot Americans themselves are fighting these multinational corporations and banks that collapsed their economy. It is through this mandate of wresting back power from these forces of globalization that Donald Trump won the election. But than, why should America be Great Again at the expense of India being a Slave Again?

GreatGameIndia is a journal on Geopolitics and International Relations 

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