“Treating POTUS better” is good for India too


A visit by the United States President (POTUS), months before the American elections, can be many things — a farewell trip, collecting paybacks for past favours or simply a low-risk, synchronised “feel good” ride amidst millions of adoring Indians — reliving thereby the past grandeur of America as a global beacon for developing world fantasies of equity, justice and morality.

A lame duck interlude and sovereign “deals” don’t mix

The one thing it cannot be is an occasion for the signing of a trade deal of any significance. Why would the host country bother to negotiate one especially if it involves, as it does today, extending favours to the US by either buying military equipment; opening up domestic markets to US exports on a preferential basis; going slow on imposing a quasi “minimum alternative tax” on the turnover in India of US tech giants — which book no profits but record explosive growth using an endless inflow of equity support or indeed deprive domestic tech giants of the opportunity to store and massage data just as US tech giants do in their own home jurisdictions.

Giving into each of these concessions means angering domestic interest groups who will remember the pain imposed in the next election. In comparison, the glow of an IOU from POTUS could turn to dust, come November this year, should Bernie Sanders or Michael Bloomberg be the new President.

India still a shy international debutant


India has never been an aggressive internationalist — we remain what Mahatma Gandhi wanted us to be in the 1930s — a largely self-sufficient village, which minimises global trade links. Ironically, even America, once the great liberaliser, is listening to the Mahatma today and shutting down its borders via high tariffs and stricter immigration rules.

Economic isolation drives Indians to vote with their feet and seek “good jobs” overseas

It is deliciously ironical that our citizens behave differently and look endlessly for opportunities abroad to escape low wages and bad public services at home. It is no wonder then that that our wish list for external achievements remains firmly bounded by the middle-class dream of more H-1B visas and a permanent seat at the UN Security Council — where grandstanding is the order of the day — never mind that we simultaneously openly discredit the salience and effectiveness of the United Nations system itself.

 Buying US choppers, a cultural extravaganza and Gigatons of “feel good”are the limits of the Trump-Modi “deal”

Look no further than enjoying at Ahmedabad a grander version of the Narendra Modi-Donald Trump event in Houston last year in September. Sadly, President Trump is an uninspiring speaker. Hopefully, the cultural events would be grander and better than the lackluster stuff Desi Americans put together. Mr Modi revels in the warmth of millions of Gujaratis and can be relied upon to dominate the event with his practised rhetoric.

A POTUS visit to Ahmedabad deletes the post-Godhra US slurs

Cutting to the chase, the POTUS visit underlines our growing influence in America — a country that had not so long-ago barred Narendra Modi from visiting it. His becoming Prime Minister in 2014 changed all that — as it necessarily must. To his credit, Mr Modi has leveraged his energy to blitzkrieg the who’s who of international politics with an outreach strategy unparalleled for Indian PMs.

Friends in high places are useful diplomatic assets. One of the purposes of determinedly cozying up to the US is to put China on notice that our influence extends way beyond our economic reach — something China yearns for despite a treasury bulging with yuan and US dollars.

The New Indian Diplomatic Strategy  – discuss security with POTUS, buy from China and massage the ageing Russia, Europe & Japan

Indian warships now patrol the Indo-Pacific high seas alongside those of the US, Japan and Australia — a “quad” determined to keep the seas open — meaning, free of permanent Chinese encroachments. Multi-sector collaboration between government departments of the US and India should be pursued to build closer professional relationships which are the core of sustained, effective collaboration. To this end we should see more, not less, of the US executive branch in India.

For the US, if it pulls out from Afghanistan, India presents an alternative channel to “influence” domestic affairs in Afghanistan. We have a good relationship with Iran to the West and a long history of engagement with Afghanistan. All this will need deep restructuring of India’s diplomatic priorities and working structures.

The only worry in reworking our relationship with the US in this manner is the hostility and suspicion it would arouse in China. The more powerful China becomes, the more skittish it gets about “retaining face” internationally. Coupled with their deepening economic woes and the more recent pandemic assault, President Xi is likely to be even more eager to be seen to remain the “big man” of China. An India preening around in borrowed boots from the last departing GI in Kabul is unlikely to be palatable to him, not to say of the bile it would evoke in Pakistan.

Stop trying to “contain” China grow with it

This is the real task before Prime Minister Modi. Can he find a path to President Xi’s heart like he has found to President Trump’s? Ahmedabad (2014) and Mahabalipuram (2019) were tentative steps which should be deepened. Some concessions can help, particularly if made in the context of joint cross-border infrastructure projects.

Rolling back the recently increased copycat import tariffs is desirable. Global value chains do not function well in an environment of regulatory constraints. Nor are we good at picking and choosing winners, East Asian style.

Far better to adopt generalised tax regimes which push value addition and exports via competitiveness. These shall create a new set of domestic winners and losers. But so long as the aggregate balance of payments impact is positive, we can work out domestic arrangements to soothe the pain of the losers.

Eco Survey 2019-20 says it best – Free Trade is good for India even if it bad for the BJP voter base

The 2019-20 Economic Survey has done yeoman service by explicitly establishing that India has not lost out from the 14 free trade agreements it has signed since 1997. Our exports of manufactured goods increased by 13.4 per cent versus an increase of 12.7 per cent in imports. Similarly, merchandise exports increased by 10.9 per cent versus an increase of 8.6 per cent in imports. In both cases, a net gain in exports.

Minister Jaishankar should tilt a little North Eastwards to walk the tight rope between China and the US

We need an impossible mix of deeper commercial and trade relationships with China and a comprehensive strategic understanding of affinity with the US. Navigating this path will require us to abjure copying President Trump’s strategy of always winning at negotiations. Some deals are best lost.

Opening our domestic market can provide China the growth boost it desperately needs to retain its domestic “feel-good” quotient. The US and the other RCEP countries would also benefit.

The “tiger” economies of Southeast Asia grew during the three decades from 1960 to 1997 by following Japan in a “flying geese model of growth” — with the lead economy periodically vacating a growth sector for the ones following.

China – A Lead Goose?

China Goose

China can be our lead goose. It has five times the economic heft of India. It can generate the trade volumes needed to fulfill our $1 trillion export ambition.

India cannot realistically hope to outgrow either China or the United States before 2040, at the very earliest. Why let blind ambition or prejudice stop us in the meantime from getting a piece of the cake being carved up between the two global giants?

Adapted from the author’s opinion piece in the Asian Age, February 22, 2020 https://www.asianage.com/opinion/oped/220220/treating-trump-better-may-be-good-for-india-but-lets-not-forget-china.html

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