Motera gets ready for 'kem chho' Trump but real challenge for Narendra Modi lies in eking out a 'limited-scope' trade deal with US

  • When Donald Trump lands in India, he will be seeking another deliverable — by signing a trade deal with India on his own terms that has so far proved elusive.

  • While Donald Trump is playing his cards, it would be wrong to assume that India has no leverage.

  • The point to be noticed, however, is how do India and the US strike synergy between Make in India and America First policies so that each can walk out with a win.

Donald Trump is a showman. He likes crowds, he likes a big audience and he likes a big spectacle. Little wonder that ahead of his maiden visit to India as the President of United States, he couldn’t help but mention the “millions and millions of people” who may cheer his arrival at the airport and later attend the “kem chho Trump” event in Ahmedabad — India’s answer to ‘Howdy Modi’ in Texas.

Trump might not have been exaggerating. Speaking to reporters on Tuesday at Oval Office while confirming his 24-25 February visit, the POTUS referred to a weekend telephonic conversation with Narendra Modi when the prime minister of India apparently told him that “five to seven million people” would greet him “just from the airport to the new stadium in Ahmedabad.” Trump seemed suitably impressed about Motera being the “largest stadium in the world” and joked about how his own political rallies where venues usually hold between 40,000-50,000 people are not a patch on the one-million capacity arena.

 Motera gets ready for kem chho Trump but real challenge for Narendra Modi lies in eking out a limited-scope trade deal with US

Narendra Modi and Donald Trump at the 'Howdy, Modi!' event in Houston, Texas on 25 September, 2019. Getty Images

It may seem curious that Trump chose to talk at length about the capacity of the stadium for the community event or the estimated strength of welcoming crowds and dismissed substantive issues such as trade or bilateral relationships in brief mentions. He was non-committal on a trade deal and beyond praising Modi as a “great gentleman”, had little to say about ties.

A White House readout on Monday had stated that “during a phone call over the weekend, President Trump and Prime Minister Modi agreed the trip will further strengthen the United States-India strategic partnership and highlight the strong and enduring bonds between the American and Indian people. But the focus, as far as Trump is concerned, was on optics of the visit.

With Trump, who has unilaterally ripped apart established foreign policy assumptions and poured hot water on post-Cold War consensus around economic globalisation and major power relationships, the medium is the message. His jokes and tweets are not trivial asides but a peek into his disruptive, anti-status-quoist mind. Relatedly, both Trump and Modi are performers (in methodically different ways). They understand the appeal of an energetic crowd and use it to send signals.

The Motera programme is being taken seriously by both sides. Indian media has claimed that PMO has sent instructions to the Gujarat government to ensure that a crowd of 1.25 lakh is organised for the event to be attended by POTUS and the First Lady of US.

And yet, for all the optics likely to surround the visit, the real action will remain subterranean. Might as well, because the biggest issue affecting bilateral ties right now is hostility over trade, and for New Delhi and Washington to reach even a “limited scope” deal before Trump’s arrival — as is expected — both sides must not limit each other’s space for manoeuvrability by making the efforts public.

Still, there are enough indications that furious negotiations are underway, and the signalling and counter-signalling preceding a likely deal are evident. That doesn’t mean we are closer to a deal because the differences are many and deep. However, before we tackle the most substantive issue that’s shaping India-US ties under this White House, it is worth taking a look at Trump’s position back home before the Air Force One lands in New Delhi.

Domestically, Trump remains strong as ever and his second term looks increasingly likely. Some may argue that even if Trump hadn’t done anything of note in the last four years to merit another stint at the helm, he would still be the man to beat before the self-imploding Democrats. As it happens, while the Democrats are in the midst of a bruising campaign to choose their likely competitor against Trump, the president has built a neat base to build his campaign.

Joe Biden, the former vice-president whom many had thought to be the strongest Democrat candidate, is going through a rough patch while Bernie Sanders — who makes even his own party uncomfortable with his brand of socialism — is the frontrunner for now.

Trump believes the failed impeachment trial will work in his favour and further consolidate his base. He calls Sanders “Crazy Bernie” and going by his tweets, seems to be spoiling for a fight.

There might be good reasons behind his confidence. While the Democrats are busy sniping at each other, Trump recently swept the New Hampshire primary by demolishing GoP challenger Bill Weld with 83 percent votes. Trump wasted little time in pointing out that he has surpassed the New Hampshire primary vote total of every incumbent president running for re-election over the last four decades.

Incumbents have always been favoured in presidential elections for a second term, but Trump has also delivered. American economy is booming. According to a latest survey, the US economy added 225,000 jobs in January, crushing market expectations of 158,000 jobs and added 7 million since Trump’s tenure while driving up wages.

As Dhruva Jaishankar, director of US Initiative at ORF, writes on Trump’s achievements, “On foreign policy, Trump’s escalation with Iran burnished his standing following the assassination by the US of Iranian General Qasem Soleimani and the accidental downing by Iran of a civilian airliner. On trade, Trump has recently concluded a “Phase One” deal with China, and successfully renegotiated a US-Mexico-Canada trade agreement (USMCA) on more favourable terms. His tax cuts have found favour with middle-class… his judicial appointments have pleased Christian conservatives, and his trade policies have appealed to certain business interests and trade unions.”

Little wonder that American voters believe Trump is a shoo-in for a second term, including the ones who do not want him at the helm.

When Trump, therefore, lands in India, he will be seeking another deliverable — by signing a trade deal with India on his own terms that has so far proved elusive. Trump and his team, led by United States Trade Representative (USTR) Robert Lighthizer, will try to drive a hard bargain in sealing a deal. The pieces of evidence on offer for an effort already underway indicate the US is cranking up the pressure on India in a calibrated way. After sealing a trade deal with China to reduce its trade deficit, Trump has identified India as the latest frontier and a series of steps have been taken to upend the existing trade structure and impose a new one.

Last year, the US removed India from its Generalized System of Preferences (GSP) programme that allowed duty-free exports worth $5.6 billion to the US. Removing India, the largest beneficiary under America’s oldest trade preferential scheme, was a statement of intent to go with Trump administration’s move to impose unilateral tariffs on Indian steel and aluminium products. These coercive tactics arise from Trump’s contention that the existing order of trade and commerce under WTO is “unfair” on the US.

At Davos in January, Trump railed against the “developing nation” status of India and China, accusing the nations of tweaking rules for their benefit. “China is viewed as a developing nation, India is viewed as a developing nation, we are not viewed as a developing nation. As far we are concerned, we are a developing nation too. But they get tremendous advantages by the fact that they are considered developing and we are not.”

In line with this policy, the US on Monday removed India from its list of “developing nations” — including Brazil, Argentina, South Africa, Thailand, among others — that are exempt from US investigations into whether these nations are “unfairly subsidizing exports”. India’s removal comes on the back of US policy that categorizes nations with a share of more than 0.5 percent or more of world trade as “developed nations” even though these nations have a per capita GNI below the standards of developed nations. India’s share in global exports was 1.67 percent in 2018, while imports stood at 2.57 percent.

This move makes it further difficult for India to get back the GSP benefits. As the Economic Times points out in a report, “the move has cast a shadow on India being able to restore preferential benefits under the Generalised System of Preference (GSP) as part of its trade talks with the US, as only developing countries are eligible for it.”

It would seem curious that the US penalised India just ahead of Trump’s India visit, but that’s exactly how the world’s self-proclaimed “best dealmaker” operates. Having removed India from preferential arrangements, Trump’s team will now use these benefits as leverage to get greater market access in India.

Reuters reports that while India is ready to offer the US partial relief on medical device price caps or roll back tariffs on some US goods such as almonds and apples, Trump’s team reportedly wants a “sweetener of $5-6 billion in additional trade for US goods to restore GSP privileges” including greater exports of frozen poultry products”.

The US media has simultaneously reported that a trade deal with India is a matter of “when”, not “if”.

While Trump is playing his cards, it would be wrong to assume that India has no leverage. Modi administration’s latest budget has seen India inching back towards a more protectionist stance, and its large market and relatively fast growth offers huge incentives.

The point to be noticed, however, is how do India and the US strike synergy between Make in India and America First policies so that each can walk out with a “win”. Beneath the welcoming crowds and “kem chho” optics, both nations will be engaged in intense subterranean negotiations.

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Updated Date: Feb 13, 2020 11:16:47 IST