India should resolve its trade dispute with the US without escalating it further

Triggering trade disruptions and causing hiccups for the economy cannot form part of stated policy. India should try and resolve its trade disputes with the US without the matter escalating into a full-scale war. US President Donald Trump has fuelled trade conflict both with friends and enemies of America. From China and Russia to the European Union, Japan, South Korea to India, the US Republican leadership has spared virtually no country to disengage or disrupt trade and investment relations.

Re-imposing economic sanctions on Iran and reversing its earlier stand, reflects unpredictability in policymaking in the White House. In this backdrop, India will be better off by striking a balanced deal that will serve its defensive and offensive trade as well as investment interests.

The dialogue involving the defence and foreign secretaries – dubbed as two plus two – need to be leveraged for smoothening the rift in trade and investment relations while strategic content was central to the Delhi summit of September 6. India postponing retaliatory tariff escalations on 29 products entailing $241 million in additional duties must be seen as a pragmatic move. This should persuade the US to unwind the 25 per cent and 10 per cent additional duties slapped on exports of Indian steel and aluminum respectively. India’s trade surplus with the US is not even a fraction of China’s at $340 billion and a similar treatment by the Trump administration is unwarranted. Meanwhile, the invitation extended to US President for being Independence Day chief guest on August 15 is a smart step by the Narendra Modi government to strengthen its relations with Washington DC. Trump must not let go of this opportunity to fine-tune his South and South East Asia policy with India at the centre.

If reports of a rapprochement between India and US on IT products, dairy and medical devices are true, they signal the success of conciliatory efforts. The other significant development that is part of the package is the US granting India STA-1 status on par with NATO group members. This allows India access to sensitive US defence technologies and source high-tech equipment from American enterprises. While India gains in terms of access to know-how, the US defence establishment reeling under stress from lack of orders, would get huge heft from deals with New Delhi. The US Congress decision to keep India out of the sanctions ambit for importing defence equipment from Russia is strategic and cannot be ignored. This is a special waiver that is rarely extended even to long-time US allies.

As several strategic, policy, economic and trade issues are simultaneously under negotiation, US Secretary of State Michael R Pampeo and US Secretary of Defence James Mattis’ visit to Delhi assumes additional importance. But, the US should not consider India’s open and transparent deal making process as a sign of weakness. A workable deal is better than no deal at all.