Defence and trade will be the highlight of US President Donald Trump's India visit

Delhi Feb 24, 2020, 10.27 AM(IST) Written By: Ratan Shrivastava

Prime Minister Narendra Modi and US President Donald Trump attend 'Howdy, Modi!' at NRG Stadium in Houston, Texas. Photograph:( AFP )

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This visit may have more political and optic overtones than economic, but that does nothing to take away its bilateral and strategic significance

The US India strategic partnership is based on shared values of democracy, common geopolitical interests, mutual respect and understanding, and marked by warmth and friendship between the political leadership and its people.  

PM Narendra Modi and President Donald Trump have met eight times in the last 3 years, of which they met bilaterally 4 times in the last year. That, President Trump, has chosen to visit India, in a busy election year, when Presidencies are focused on their campaigns and domestic agenda, is an indicator of the level of mutual comfort and trust between the leaders.  

This visit may have more political and optic overtones than economic, but that does nothing to take away the bilateral significance of the visit, as well as, the significant progress made in the areas of strategic importance, like defence, counter-terror, security, oil & gas and trade ties.

The key takeaways from the visit would probably be in the fields of Defence, Trade and Space.  

The deepening of the defence ties between the two nations has witnessed steady progression with the Defence Trade and Technology Initiative (DTTI), 2+2 dialogues, increased frequency of military exercises, moving from the annual YUDH ABHYAAS series to TIGER TRIUMPH – a tri-services joint exercise facilitated by the signing of the LEMOA and Communication, Compatibility & Security Agreement.  

It is expected, that TIGER TRIUMPH tri-service exercise with India will become an annual event and it is a vindication of the India’s emergence as the strategic partner of the US not only in the region but outside of NATO, as the only nation to have been given the status of major defence partner, to whom the US has consented to share sensitive military technologies, weapons and equipment – in no small means catalysed by the STA-1 status that India enjoys.  

Geopolitics: China, being the elephant in the room, the renaming of the PACOM as the Indo-Pacific Command is reflective of the growing strategic stature of India in US military strategy and for the enforcement of the free and open, rules-based international order in the Pacific region. 

There is the convergence of interest for India and US to limit the Chinese influence in the South Asian & ASEAN region. India has assiduously cultivated maritime security alliances with Japan, Vietnam, Indonesia and Singapore in pursuit of a free to navigate the Pacific and Indian Ocean region and limiting the Chinese influence in the South China Sea.  

A free democratic and emergent power, India, is the ideal counterweight to an authoritative and expansionist China and this balancing of the two Asian powers is reflected in the formation of the QUAD of India, US, Japan and Australia. The recognition of India as a Strategic Partner is an outcome of the designation of China as a competitor by the present Trump administration. 

The US pivot to Asia precedes the Trump Presidency – and the focus on India, from President Bush to Obama and Trump. It also highlights the bipartisan support that India enjoys on Capitol.  

In the recent past though, this has been strained with incidents with some political overtones, on Article 370 and Diversity, which India clearly views as internal matters. These issues may have local domestic political overtones fueled in no small measure by the hostile press that India has attracted in the recent past especially under Modi 2.0 government. 

India has to clearly reach out and be proactive in putting forth the facts on Article 370, CAA and Diversity, to the US people to counter the narrative that is built based on part fact and part imagination such as the linkage of CAA with NRC/NPR. 

Defence Trade: The defence trade between India & US has moved from a few hundred thousand dollars to approx. $20 billion, if the present visit results in the widely anticipated sale of 24 MH60R helicopters for the Indian Navy and the 6 Apache helicopters for the Army Aviation – both deals which have been years in the making. However, with the present administration pulling out all stops – the anticipated sale of NASAM-II system, 30 Armed Sea Guardian drones, 6 more P8I aircraft with advanced onboard communication and surveillance systems and 13 Mk45 naval guns.  

The cherry on the cake will be if the Indian Navy opts for FA 18 Super Hornet Block III, though the multi-role aircraft for IAF, with both Lockheed Martin and Boeing throwing their hats in the ring, may take more time than anticipated riding on the back of the sluggish economic growth with more funds being allocated for infrastructure and social sector. 

The only threat to this otherwise thriving partnership could come from the potential acquisition of the S400 missile system by India – though the US has shown flexibility in the past in accommodation of key Indian strategic interests such as the Chabahar port for the land route to Afghanistan, support during Doklam crisis and the abrogation of Article 370, besides diplomatic support to Indian counter-terror initiatives, but S400 deal with Russia could test this resolve. 

Energy has been an area of increased cooperation between India and the US, and the energy exports to India from the US (both oil and gas) have registered an impressive growth of nearly $8 billion and may touch $10 billion, with Petronet LNG ($2.5 billion)  and other companies, investing a total of $4 billion in US  and have contracted 9 million metric tons per annum of LNG. This has helped bridge the trade deficit and has the potential to meet the ever-growing demands of energy in India – both in conventional and non -conventional sources including Nuclear energy as a part of the clean energy initiative of the government.  

Space is an area which has seen slow yet steady cooperation of ISRO with NASA, with the space agencies building the strategic NISAR satellite at an estimated cost of $1.5 billion for studying the hazards, environmental change and natural processes. NISAR will be launched aboard an Indian launch vehicle in 2022. India and the US have been collaborating on space missions, and space crafts have carried their scientific instruments. The confirmed discovery of water on the south surface of the moon is credited to Chandrayaan 1 which carried a NASA probe. 

Space Industry: There is considerable scope for the Indian and US Space industry to work together leveraging their complementary strengths – marrying Indian frugal space engineering and lower costs of material, supply chain and production which as a significant small industry content, with the cutting edge technologies of US firms.  

India and the US could potentially collaborate on the planned Indian space station as the ISS retires by 2030 and India’s planned space station is in place by that time. There could be planned human space flights as this is an area of interest for both the nations, moving forward. 

Challenges: With all the good tidings, there are drags and challenges, to the growing partnership. Apart from US Administration’s desire to see India & Pakistan engage more bilaterally, more so in view of the Afghanistan Peace Deal to be announced on February 29 and the impending withdrawal of US troops and the recent offers of mediation, US would like to see greater involvement of India in Afghanistan even though PM Modi has ruled out boots on ground and has its reservations on the role of Taliban in the new Afghan dispensation, which could embolden terror outfits in Kashmir, but India could support the new Afghan government in terms of assistance, lines of credit and trade through the Chabahar route. 

Trade: Trade is a major challenge in the US –India bilateral relations. The US-India trade grew at 10 per cent annually for the last two years and crossed $160 billion in last year. The trade deficit – something that the present administration has constantly focused on, has narrowed by 9 per cent. Historically, India has had a trade surplus but it is changing with the US goods trade deficit with India was at $20.8 billion in 2018, a 9 per cent decrease ($2.1 billion) over 2017. 

Though bilateral investment has room for much improvement but Indian companies have invested almost $18 Billion and created direct employment for US citizens, so have US companies in India. Major US companies as Google, Microsoft, GE, Honeywell, Boeing, Lockheed Martin and Collins Aerospace have technology centers and joint ventures in India which have contributed to both the economies 

The list of requests from the US TR is long with respect to access to the Indian markets, to single-brand retail, medical devices (reduction of duties /higher margins), pharma, insurance, banking and financial services. Higher FDI limits in the sectors not permitting more than 49 per cent FDI, data localisation, IPR protection, and e-commerce issues, have in the recent past been a bugbear for both the ministers – Lighthiser and Goyal. While India may have its share of issues such as the H1B visas for Indian technology giants, higher tariffs on aluminium & metals, and the withdrawal of the GSP privileges. 

President Trump has often quoted Indian tariffs and barriers, as an impediment. It is true that the US may be a more open market than India, but it can be said, that Indian tariff structure is WTO compliant with Japan and South Korea levying a higher tariff on certain goods. Apart from Harley & Ford, there is scope for early outcomes in food, dairy, pharma, medical devices and IPR protection in trade talks between the two democracies. 

Way Forward: Undoubtedly, these are barriers to entry and do not make for ease of doing business, but the way forward, could be - by breaking down into individual milestones, dividing their mutual interests into smaller segments, than to attempt a large all-encompassing deal that has been long in the making.  

There is enough scope to work on this and the trade relationship between India and US is not a 100 meters dash but more akin to a long-distance marathon, where not stamina alone but technique, even pace and focusing each mile at a time ensures success. 

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)