As Indian Prime Minister Narendra Modi, after winning a second term, sets his eyes to confront major foreign policy challenges, India-U.S. relations stand at an inflection point. In the strategic context, India-U.S. ties are well-positioned for Modi 2.0 to move further forward. However, New Delhi and Washington seem destined to encounter a number of roadblocks in the economic sector, at least in the near future.
A number of high-level meetings are on the schedule, including a planned meeting between Modi and President Donald Trump on the sidelines of the upcoming G-20 summit in Osaka, Japan and an upcoming visit by U.S. Secretary of State Mike Pompeo to India. Therefore, it is imperative to reflect on the highs and lows of India-U.S. relations, and the way forward in this strategic partnership.
Where do India-U.S. relations figure on India’s foreign policy radar as New Delhi seeks to leverage its relationships with all the major powers? The United States remains perhaps the most consequential partner in India’s Indo-Pacific strategy and several U.S. government documents, including the latest U.S. Indo-Pacific Strategy released by the Department of Defense, laud the convergence of interests and values between the two countries to engineer a “free, open, inclusive and rules-based” Indo-Pacific. Defense engagement has been and is an important pillar of India-U.S. cooperation. Modi’s Make in India campaign finds resonance with America’s quest for a major source of export for its defense industries. The India-U.S. Indo-Pacific partnership has further provided impetus to augment cooperation in the maritime domain. The scope and regularity of interoperability exercises between the militaries of the two countries has been on an upward trend.
On a recent visit to the United States, Indian Foreign Secretary Vijay Gokhale said the “India-U.S. relationship has really flourished since Modi took power.” However, as India and the United States attempt to chart new territories in their relationship, economic issues are primed to play spoilsport.
Interestingly, it was India’s economic opening in the post-Cold War era that caught the attention of the U.S. Commerce Department, which dubbed India one of the Big Emerging Markets (BEMs). According to the latest data provided by the Office of the United States Trade Representative, U.S.-India trade in goods was merely $87.5 billion and trade in services was at $54.6 billion in 2018. Despite all the high expectations of taking bilateral trade closer to $500 billion, a tit-for-tat tariff spat between the two countries is catching all the attention.
Trade related differences between India and the United States are not new, but the transactional nature of the Trump administration approach to these issues has injected bitterness into the relationship. Trump called India the “tariff king” and also announced withdrawal of the Generalized System of Preference (GSP) from India, which will amount to losses of $190 million on the total $5.6 billion in trade under the GSP. India’s Commerce and Industry Minister Piyush Goyal reportedly brushed aside the impact of GSP withdrawal, saying India accepted it “gracefully” and would rather work toward making Indian exports more competitive. Nevertheless, New Delhi has taken a reciprocal move by deciding to impose long-pending retaliatory tariffs on a number of U.S. products.
Concerns abound that India, following China, could perhaps become the next target for Section 301 investigations under the U.S. Trade Act of 1974, which allows U.S. administrations to take actions, including imposing tariffs, against other countries whose actions are deemed to restrict U.S. commerce. Modi, speaking at the recent Shanghai Cooperation Organization (SCO) summit in an apparent rebuke to the Trump administration’s trade related steps, criticized unilateralism and trade protectionism and propagated the need for a rules-based, anti-discriminatory, and all-inclusive WTO-centered multilateral trading system. Pompeo, who will be visiting India soon, while speaking at the India Ideas Summit of the U.S.-India Business Council said, “We remain open to dialogue, and hope that our friends in India will drop their trade barriers and trust in the competitiveness of their own companies, their own businesses, their own people, and private sector companies.”
Meanwhile, the U.S. decision to sanction countries like Iran and Russia under the Countering America’s Adversaries through Sanctions Act (CAATSA), has often made it difficult for India to maneuver its ties with a primary defense supplier like Russia and a primary energy supplier like Iran. Alice Wells, head of the State Department’s South and Central Asia Bureau, speaking at a congressional hearing, warned that India’s decision to buy the Russian-made S-400 Triumf missile defense system could “limit” growing interoperability between the U.S. and Indian militaries. In an apparent attempt to dilute further India-Russia defense trade, the United States has reportedly offered high-end defense equipment such as the National Advanced Surface-to-Air Missile System (NASAMS II), the Terminal High Altitude Area Defense (THAAD), Patriot Advance Capability (PAC-3), and the fifth-generation F-35 fighter jet.
India’s former Foreign Secretary Shyam Saran recently wrote, “We will have to actively seek partnerships which are more issue based and hold the promise of advancing India’s economic and security interests. In this sense, some partnerships will be more valued than others but need not be exclusive.”
As such, ahead of Pompeo’s visit and the Modi-Trump meeting at the G-20, the task is set out for India’s foreign policy mandarins. New Delhi is required to balance its relations deftly, at a time of rising U.S.-China confrontation and Trump’s apparent intent to increase economic pressure on partners like India, despite broader strategic convergence. It is high time for the leadership and the diplomatic machineries on both sides to sit down and seriously negotiate. The India-U.S. partnership is at a critical juncture. While India and the United States both call for a rules-based order in the Indo-Pacific, targeting China’s intransigence over security matters, India joins China and Russia to call out the United States’ unilateral trade protectionism. India’s great power relations are at a turning point where New Delhi has to adroitly manage its security and economic interests. How India creates space for the protection and promotion of its national interest in this complex and fluid environment will remain a prominent foreign policy question as Modi steps into his second term.
Monish Tourangbam is Assistant Professor at the Department of Geopolitics and International Relations, Manipal Academy of Higher Education (MAHE), Manipal.
Radhey Tambi is a freelance strategic analyst and she completed her Masters in Geopolitics and International Relations from Manipal Academy of Higher Education (MAHE), Manipal.