November 27, 2016

‘India should be less worried about trade with US than others’


The following interview originally appeared in The Business Standard on November 27, 2016. 

After a long hiatus, a Republican has become the President of the United States. And it is not just any old Republican but Donald Trump, who is above all, a man who understands business and finance. What does his becoming US President mean for South Asia as a region and India in particular?

Since the end of the Cold War, India has largely preferred working with Republicans or even centrist Democrats, as they have been more open to trade and immigration and generally hawkish on foreign policy matters, and consequently more supportive of India’s rise. Republicans in the U.S. Congress were among the biggest advocates for lifting sanctions against India after the 1998 nuclear tests, and of course George W. Bush played a major role in the transformation of bilateral ties. But in his successful presidential campaign, Trump has thrown out many elements of the traditional Republican platform on social, economic, and foreign policies. I would, in addition, question his business acumen. By his own count, Trump has declared bankruptcy four times, and he still mostly reaps the benefits of a large inheritance.

So Trump and his administration come into power as somewhat blank slates on India and our neighbourhood. A few key elements of Trump’s broader policies are already discernible, especially on trade, where he has reiterated his promised to withdraw from the Trans-Pacific Partnership. However, many other issues of importance to India will depend on the team that Trump surrounds himself with, including on terrorism, immigration, non-proliferation, and climate change. A more managerial Secretary of State or a Secretary of Defense with greater experience to India’s west may mean a bumpier ride for India, at least at the beginning. And of course a career bureaucracy and large U.S. military will ensure an element of continuity in U.S. policy, for better or worse. While no one – not even Trump himself – knows exactly what policies he’ll be able to implement, there is a big opportunity right now for India to shape a favourable outcome from his election. New Delhi needs to seize it, and there are signs that it already is doing so.

A lot has been said about his views on immigration. Do you consider this a matter of crucial importance in Indo-US ties?

Immigration to the United States is a big issue for India. There are over three million Indian-Americans, and they comprise the wealthiest and highest-educated ethnic group in the United States. Many Indian-Americans have maintained close ties with India, and are among the most important foreign investors. Through ups and downs, Indian-Americans have provided a natural bridge between the two countries, ensuring that India’s relations with the United States are on a fundamentally different plane from India’s relations with other large and powerful countries such as China, Japan, or those of continental Europe. U.S. efforts at stemming immigration could, therefore, have a negative effect for bilateral relations, making the United States a more “normal” country from India’s point of view: just another partner with which to do business.

It is at present unclear whether a Trump administration will be willing and able to distinguish between low-skilled and high-skilled immigration, or between permanent and temporary migrants. Indian industry, in particular, will be paying a lot of attention to the future of the H-1B visa regime, which has benefited both countries significantly. Additionally, many Indians – and I include myself here – have benefited from studying and working in the U.S. before returning to India. Consider Indian industrialists such as Ratan Tata or the Ambanis or Anand Mahindra, or political leaders like Piyush Goyal or Jayant Sinha or Shashi Tharoor, or any number of prominent Indian academics, intellectuals, and activists.

Should New Delhi be concerned about his position on trade?

India should be less worried about trade with the U.S. than others – notably, China, Japan, Southeast Asia, and Europe. That’s because the Indian economy simply isn’t as dependent on trade with America as most others. In fact, more often than not, trade issues were proving an irritant in bilateral relations. The Trans-Pacific Partnership, for example, would have put India at a short-term disadvantage. Trump’s promise of imminent withdrawal from the TPP will therefore give India some breathing room and respite. That said, trade in services could possibly suffer from a more protectionist United States, and the Modi government may find it slightly harder to fulfil its promise of boosting Indian exports.

Will Trump’s election mean a recalibration of Sino-US relations, and as a result, some instability in Asia?

There will certainly be changes in Sino-U.S. relations, but there are wildly different indications about the nature of that change. Some of Trump’s advisors have articulated an Asia policy that involves a major U.S. naval build-up in Asia coupled with more barriers on trade. Militarily and politically, this might mean a closer relationship with India, Japan, and others who share concerns about China’s rise and military modernization. It may also lead to a rethink in Beijing about its own military ambitions. Alternatively, an unwillingness or inability to see through a military build-up by the United States or a dilution of U.S. alliance structures in the Asia-Pacific could lead to greater Chinese adventurism, which India would clearly not welcome.

There are equally contradictory signals on the economic side. If a decision to stop facilitating China’s economic rise is coupled with a shift towards deeper economic and commercial cooperation with India, it would obviously be a great benefit. The argument in favour of such an approach would be that India’s economy is not state run, even if it is overregulated, unlike China’s where business is still dominated by state-owned enterprises. At the same time, India should be concerned about a potential trade or currency war between the U.S. and China leading to a race to the bottom.  A still fragile Indian economy could be collateral damage.

What does his election tell us about American society?

While Trump’s presidency may in fact prove beneficial for India in certain ways, I’m not sure it reflects particularly well on the United States as a country or as a society. Most of the 62 million Americans who voted for Trump may not share the views that he has articulated or tolerated regarding minority groups and women. But equally, those who voted for Trump evidently felt that his condemnable and divisive rhetoric did not disqualify him from the presidency. Trump has already tried to distance himself from some of his white supremacist supporters, but there is no question that some will now feel empowered.

The United States has long distinguished itself as a country open to immigrants from many countries. Today, more than 13 percent of Americans were born abroad. The United States has also been quite successful in dealing with issues of multiculturalism, particularly relative to the nation states of Europe, including the UK, France, and Germany. Trump’s election is, in that sense, a setback for the United States, and will undoubtedly affect America’s international appeal or soft power. Of course, this could all be a temporary blip, much as Barack Obama’s election seems in hindsight. The United States has exhibited an ability to self-correct under much more adverse circumstances in the past. Nonetheless, we should expect a period of much more open fissures in American society, between rural and urban America, Republicans and Democrats, men and women, rich and poor, and whites and non-whites.