India and the United States (US) are back to rubbing each other up the wrong way. Both governments remain committed to the sense that they are, in the words of Atal Bihari Vajpayee, “natural allies”. Yet their very proximity has meant the recurrence of ever-increasing points of friction. India and US trade relations may be darkening right now but it is doing so in part because the economic relationship is much deeper and wider than it has ever been. It is opportune that US Secretary of State Mike Pompeo is coming to New Delhi this week and kicking off his government’s engagement with the second Modi government.
The trade problems are an outlier in an otherwise sturdy relationship. India and the US have transformed their defence relationship in the past few years. India is a large purchaser of US arms; the two will be signing another round of defence agreements soon; and there is no country in the world with which New Delhi does more in terms of military exercises. The US adoption of the term “Indo-Pacific” is indicative that the two align on the most important strategic issue of the century: how to handle the rise of China. Even on the economic front, there is largely comity. The two worldviews are remarkably similar. There is some geopolitical space between them, but it is minimal compared to the yawning gap between New Delhi and Beijing, or even New Delhi and Moscow. In the recent diplomatic struggles with Pakistan, Washington sided squarely with New Delhi.
Many of the issues that constitute the present trade dispute are not new. However, under the Trump administration trade issues have achieved a new prominence and the US president will not budge on these issue with any country. The real problem is the breakdown in trust between the two governments that followed earlier rounds of negotiations — a consequence of short-sightedness by negotiators on both sides. There are also larger trends in the international trading system about which New Delhi seems behind the curve, especially in cross-border data movement and the declining relevance of the World Trade Organisation. The best solution would be a long-term framework agreement on trade and investment policies that would help stabilise the economic relationship. In the next few weeks, however, a set of quick agreements on a cluster of issues and an agreement to talk substantially about the others would be good enough. And, amid all this, for both sides to keep in mind that they are fundamentally on the same side about the things that really matter.
{{/usCountry}}Many of the issues that constitute the present trade dispute are not new. However, under the Trump administration trade issues have achieved a new prominence and the US president will not budge on these issue with any country. The real problem is the breakdown in trust between the two governments that followed earlier rounds of negotiations — a consequence of short-sightedness by negotiators on both sides. There are also larger trends in the international trading system about which New Delhi seems behind the curve, especially in cross-border data movement and the declining relevance of the World Trade Organisation. The best solution would be a long-term framework agreement on trade and investment policies that would help stabilise the economic relationship. In the next few weeks, however, a set of quick agreements on a cluster of issues and an agreement to talk substantially about the others would be good enough. And, amid all this, for both sides to keep in mind that they are fundamentally on the same side about the things that really matter.
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