India ‘most protectionist’ country, claims Trump’s top trade adviser in new book | World News - Hindustan Times

India ‘most protectionist’ country, claims Trump’s top trade adviser in new book

Feb 16, 2024 02:25 PM IST

Robert Lighthizer was seen by Indian negotiators as a difficult partner through Donald Trump’s presidency and a key reason why trade talks didn’t succeed

WASHINGTON: When Robert Lighthizer, who served as President Donald Trump’s trade representative between 2017 and 2021, prepared for trade negotiations with Indian counterparts, he kept the biographies of 15 Indian billionaires on his desk. He believed that while India had an “extremely strong professional bureaucracy” in all areas of government, it was also “unusual in the extent to which oligarchs influence government policy” and read the books to know their interests as a predictor of the Indian government’s positions.

(FILES) Former US Trade Representative Robert Lighthizer claimed that he told PM Modi in 2019 in the presence of Trump, that the US believes that India is the “most protectionist country (AFP FILE)
(FILES) Former US Trade Representative Robert Lighthizer claimed that he told PM Modi in 2019 in the presence of Trump, that the US believes that India is the “most protectionist country (AFP FILE)

Lighthizer, who Indian negotiators saw as a difficult partner through Trump’s presidency and a key reason why trade talks didn’t succeed, has also claimed he told Prime Minister Narendra Modi at a meeting in 2019, in the presence of Trump, that the US believes that India is the “most protectionist country” in the world and its trade practices were causing job losses in America, hurting American farmers and leading to a large trade deficit. This, according to Lighthizer, was in response to Modi expressing a set of trade-related concerns to Trump, including unilateral US decisions taken in an Indian election year.

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Lighthizer has made these revelations in a book, No Trade is Free: Changing Course, Taking on China and Helping America’s Workers, that was published in 2023 and outlines his position against the free trade ideology that guided America in the past and the Trump administration’s record on the issue. Trump continues to turn to Lighthizer on trade policy, which is one of his strongest domestic political campaign issues. He is also billed to get a cabinet-rank position handling trade again if Trump is elected in 2024.

Offering his understanding of a key driver of India’s trade policy, Lighthizer noted, “When I was in negotiations with Indian officials, I kept a copy of the biography of each of the country’s 15 or so billionaires on my desk. In predicting Indian government positions, I would look to the interests of these men. I can remember at one point telling an Indian friend of mine who had made a fortune in business that I thought there were 15 oligarchs who basically ran the country. He corrected me. ‘Bob you’re wrong. Only about seven of them actually run the country. The others just try to influence the seven.’” Lighthizer did not name the individuals.

The book offers an extensive critique of how the liberal trading regime harmed the working class in America by prioritising corporates and consumers, documents the multi-layered threat China poses to American interests and how the Trump administration took on Beijing, and calls for a “strategic decoupling” from China. Under Trump and Lighthizer, there was a major rupture in America’s trade and China policy, key parts of which have been carried forward by the Joe Biden administration.

In a section on other partners where he deals with India, Lighthizer has first acknowledged the shared challenge from China (“the adversary of my adversary is my friend”). He has outlined his understanding of Modi’s worldview (“dedicated to raising India out of poverty… through state control of innovation, high tariffs, mercantilism, and protectionism”) and explained the Trump administration’s trade policy towards India (“use...leverage... to increase our access to their market, to obtain fairness and reciprocity in trade, and to achieve balance”).

He has documented his own relationship with his counterparts, Suresh Prabhu and Piyush Goyal (“a smart, gifted politician from Mumbai”) and offered details of the US’s decision to remove India from the Generalised System of Preferences (GSP). He has given his side of the story on why a trade deal with India didn’t work out, including his sense that Goyal wanted it but was facing multiple pressures. And he has extensively narrated a conversation with Modi on the sidelines of a G7 meeting in France which offers a rare glimpse into top-level India-US trade talks.

HT has not independently verified the details of the conversations that Lighthizer has claimed to have with his interlocutors. This remains a reported account of his experience and views as outlined in his book.

Two caveats are, however, important.

During the period that the former USTR describes, Indian officials often saw Lighthizer as an obstacle to constructive trade talks and a spoiler within the administration on the India relationship. In conversations then, the Indian side argued that it had exhibited flexibility when possible and retaliated when needed, including with counter-tariffs, with the aim of defending Indian economic interests. They found it a challenge to deal with what they saw as an erratic administration which constantly shifted both procedural meetings and substantive goalposts, and saw India’s ability to resist Trump’s pressure as a sign of the government’s strength and commitment to national interests.

Lighthizer’s critique of India, especially the role of businesses, is also tinged with irony given Trump’s domestic record which offered tax cuts to the richest corporates and who spent an inordinate amount of time batting for company-specific concessions, such as demanding import duty cuts on Harley Davidson motorcycles with India. The book has also been published in an election year where the incentive of politicians is to exaggerate their successes and project strength.

Modi gifted, Indian trade policy mercantilist

Lighthizer kicks off his India section by recognising its strengths. He terms India and the US “natural friends”, points to both being democracies and sharing many similar “Anglo Saxon institutions”, and the presence of the four-million strong Indian diaspora in the US.

He then outlines what the Trump administration saw as the key glue of the relationship. “Perhaps most importantly, the rise and growing militarism of China is the greatest geopolitical concern for both our nations. India and China both claim territory in the mountains that separate them. India feels as threatened as we do by the aggressive surge of China. There is truth in the old saying (modified for obvious reasons) that the adversary of my adversary is my friend.”

After a brief outline of the India-China border dispute, wars and clashes, and attributing India’s participation in Quad to this history, Lighthizer turns to Modi and refers to his political background, including his association with the Rashtriya Swayamsevak Sangh.

“Prime Minister Narendra Modi is a particularly interesting figure. He came up through the ranks of right-wing political organizations and clearly considers himself a nationalist…He is an extremely gifted politician and the first leader of India who was born after its independence in 1947,” Lighthizer notes. He then describes what he sees as Modi’s approach to trade. “Modi is dedicated to raising India out of poverty. He believes in doing it through state control of innovation, high tariffs, mercantilism, and protectionism. There are lots of hangovers from the time of British rule, but free trade is not one of them.”

Describing India as a “reasonably large economy” that has grown at a healthy rate but is still poor and needs economic development to maintain stability, Lighthizer contextualises the India-US trade relationship. “In 2020, the US trade deficit in goods and services with India was $33.7 billion. The largest goods driver of this deficit was an $8.1 billion deficit in pharmaceutical products, followed by a $5 billion deficit in jewelry and silverware. India also exports large quantities of auto parts, travel goods, and steel pipe.”

The former USTR then critiques India’s policy approach to trade, claiming India uses “many of the tools of modern mercantilism” -- these include “high tariffs, a bureaucracy focused on keeping imports out, and a system of industrial policy and protectionism”. Lighthizer notes that India’s “average MFN applied tariff rate of 17.6 percent is the highest of any major world economy” and it maintains particularly steep tariffs on some goods, “including motorcycles (50%), automobiles (60%), and walnuts and raisins (100%)”.

He also lists out other American grievances with India — intellectual-property-rights violations; limited patent protections and poor copyright enforcement under the legal system; limits on foreign investment in banking and insurance; price controls on US imports in medical device sector; protectionism in the agricultural sector, “where it uses tariffs and safety standards to help politically potent farmers groups”.

Turning to India’s industrial policy, with references to both the Make in India and Atmanirbhar Bharat campaigns, Lighthizer writes that India has aimed to “increase foreign investment, lower some regulatory burdens, increase exports, and protect products in targeted sectors including electronics and communication devices”. But India also, Lighthizer claims, subsidises exports “through tax and customs exemptions in industries such as textile, steel and wood products”.

While acknowledging it is too early to judge India’s efforts, Lighthizer concludes that India is “developing an industrial policy like that of East Asian nations including China”. He also notes that as a founding member of GATT, WTO’s predecessor, India “managed to maintain very high tariffs”, and more than a third of its tariff lines are not bound and can be raised to any level. “In the subsequent rounds of trade negotiations, it continued to avoid taking on commitments that would limit its industrial policy.”

Trump’s trade approach to India and the story of GSP

During the Trump presidency, the administration’s strategy with India was to “maintain good relations” but then use its leverage to “increase our access to their market, to obtain fairness and reciprocity in trade, and to achieve balance”.

It is in this backdrop that the former USTR outlines his version of the story on GSP, which emerged as a key fault line between India and US. Lighthizer has acknowledged that the US “tried to leverage” India’s use of GSP, “a duty-free programme”, to obtain more access. “India is by far the biggest user of the program. A large percent of all its imports come into the United States under this preference duty-free. While India uses GSP and runs large trade surpluses with us, it denies us equal access to its market and charges our producers high tariffs.”

Lighthizer then claims that after an investigation and meeting legal requirements, US removed India from GSP status in June 2019. “We then negotiated to restore it in exchange for more market access concessions. Our objective was fairness and balance,” Lighthizer writes. But he adds that the US concluded that this would not happen both because India was not “in the habit of opening its market”, and because the US was seeking concessions in agriculture at a time when the farmers’ agitation was on.

While India-US trade volumes have grown in recent years, the US hasn’t restored India’s GSP status till now, a legacy of Trump and Lighthizer that remains.

In France, when Trump and Modi met

A key section on India is Lighthizer’s description of a meeting between Modi and Trump in August 2019 on the sidelines of the G7 meeting in Biarritz in France.

Lighthizer notes that Trump and Modi had an “excellent relationship” and first discussed foreign policy issues. Modi then turned to trade. “He clearly wanted to get GSP back. He told Trump that it had been unfairly taken away and further that it had been done during his reelection campaign, that the US was being very difficult, and that I was refusing to deal with his minister,” the then USTR Lighthizer, who was in the room, recalled.

Trump responded briefly and then asked Lighthizer to speak. “I had had enough. I thought Modi’s entire story was lopsided. He had clearly been misinformed by his staff,” says Lighthizer about his mood at the time. He first told Modi that GSP was withdrawn after the election “precisely so that it would not be an election issue for him”. (The official announcement was indeed in June after the elections but the intent to withdraw India’s status was announced in March before the elections).

Lighthizer claims he then offered a broader response to Modi’s concerns. “I stated our case that it (India) was the most protectionist country in the world and that it was causing a large and growing trade deficit. Americans were losing their jobs because of their practices. They were hurting our farmers. I said that I had been negotiating with their trade minister, Suresh Prabhu for two years and had made absolutely no progress. At times, I said, he had not even returned my call for weeks. I went through the specifics of their unfair practices. I told Prime Minister Modi that we could do a deal with India, but it would have to make concessions.”

Lighthizer claimed that the meeting ended on a positive note and Modi came up to him to shake hands and invited him to India, a trip that couldn’t happen due to Covid-19. “Several members of our delegation congratulated me for the respectful but forceful presentation. Jared Kushner (Donald Trump’s son-in-law and close aide) told me it was worth the price of admission by itself.”

The final talks with Piyush Goyal

After this meeting between the leaders, the USTR says negotiations began in earnest with a “new trade minister named Piyush Goyal, a smart, gifted politician from Mumbai”.

The US raised its issues — “tariffs, agriculture access, medical device impediments, barriers to e-commerce and insurance, discrimination in the electronic payment sector, fish subsidies, and the list goes on” — and made headway. But Lighthizer says the two countries “could never quite close a deal”.

Offering his assessment of why it didn’t work out, the then USTR has written, “I always felt that Goyal wanted one but had to contend with the bureaucracy and the farmers as well as with me. I really concluded that India was just protectionist. That was part of its political DNA, and the best way to deal with that was through unilateral action.”

Ending on a positive note, Trump’s top trade adviser concluded that it would be “ideal” if the US could have a “closer economic relationship” with India. “We clearly have the geopolitical reason to do it. India is a natural adversary of China. It also has a population that contains an enormous number of very educated and smart people as well as a large inexpensive labour force.”

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    Prashant Jha is the Washington DC-based US correspondent of Hindustan Times. He is also the editor of HT Premium. Jha has earlier served as editor-views and national political editor/bureau chief of the paper. He is the author of How the BJP Wins: Inside India's Greatest Election Machine and Battles of the New Republic: A Contemporary History of Nepal.

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