Trade, defence deals to be focus of Trump’s visit

Trade, defence deals to be focus of Trump’s visit

by Arnab Mitra

A limited trade deal worth about $10-12 billion between India and US is likely to be signed during President Trump’s visit to India. This will pave the way for an FTA between the countries and facilitate a closer strategic clinch that will provide the world a counter to the rise of China.

Highlights:

  • The US and India are likely to sign the much talked about limited trade deal between during Trump’s India visit.
  • India’s defence purchases from the US forms a major part of Indian efforts to balance bilateral trade.
  • The importance of ensuring freedom of navigation across all internal waterways including the South China Sea will be a crucial item on the two leaders’ agenda.

The first official confirmation came on social media. “President @realDonaldTrump and @FLOTUS will travel to India from February 24-25 to visit Prime Minister @narendramodi! The trip will further strengthen the US-India strategic partnership and highlight the strong and enduring bonds between the American and Indian people,” the White House said in a tweet.

Shortly afterwards, India’s Ministry of External Affairs released a statement saying: “During the visit, President Trump and the First Lady will attend official engagements in New Delhi and Ahmedabad, Gujarat, and interact with a wide cross section of Indian society… The global strategic partnership between India and the US is based on trust, shared values, mutual respect and understanding, and marked by warmth and friendship between the peoples of the two countries.”

Indian Prime Minister Narendra Modi had invited Trump to visit India during his visit to the US in June 2017. The US President couldn’t attend India’s Republic Day celebration last year because of scheduling issues.

Limited trade deal in focus

Senior officials in New Delhi told ‘India Global Business’ that a limited trade deal between India and the US is likely to be signed during Trump’s visit.

Trump’s laser focus on trade issues has, in recent times, threatened the otherwise robust and timely Indo-US strategic partnership that many analysts have described as potentially “the defining relationship of the 21st century”. Former Pakistani Ambassador to the US Hussain Haqqani has said: “India could be to America in Asia during the 21st century what the UK was in Europe during the 20th – the most reliable partner in great power competition.”

Addressing Trump’s pet peeves

Trump’s pet peeves are India’s enduring trade surplus with the US – down from $30 billion a few years ago to about half that figure now – the Modi government’s imposition of price caps on imported medical devices and, believe it or not, New Delhi’s high tariffs on Harley Davidson motorbikes.

India, on its part, wants the US to restore benefits under the Generalised System of Preferences (GSP) under which Indian exports worth $6.3 billion, or more than 10 per cent of American imports from India, received duty free treatment in the US, and, being primarily a services-focused economy, easer access to the US market for its professional talent.

Then, New Delhi also wants Washington to lift the punitive duties it imposed on Indian steel and aluminium exports in retaliation to which Indian raised duties on US exports to India.

$10-12 billion trade deal likely

‘India Global Business’ has learnt from informed sources that a limited trade deal worth about $10 billion to $12 billion annually is being finalised and is likely to be signed by Indian Commerce Minister Piyush Goyal and US Trade Representative Robert Lighthizer during the US President’s visit to India. The two are scheduled to meet next week to finalise the text of the agreement. This limited trade deal will be a precursor to a full-fledged free trade agreement (FTA). But many experts feel such an FTA could take a long time.

Media reports in India suggest that the issue of medical devices, which was a key obstacle in the trade talks between the two countries, has been resolved but government sources declined to share any details of the agreement.

Win-win for both sides

The deal is expected to provide the US IT industry, dairy products and Harley-Davidson motorcycles easier access to the vast Indian market. The US is also keen to sell more almonds to India, which has, in return, sought market access to its fruits including grapes.
Goyal has told the Indian media that India has drawn a red line on any imported food product with animal feed unless it was clearly marketed as non-vegetarian – because of the sensitivities of large sections of the Indian population. The Indian side is also resisting US demands for greater market access for agricultural products where India is self-sufficient in order to protect its farmers.

The final contours of the deal will be beneficial to both sides and will pave the way for a broader free trade pact between the two nations, officials said.

Defence deals in the works

India’s defence purchases from the US forms a major part of Indian efforts to balance bilateral trade. The Indian Ministry of Defence is likely to approve a deal worth $2.6 billion for the purchase of 24 MH-60 R Sea Hawk helicopters for the Indian Navy. The Cabinet Committee on Security, which has the final say on such matters, will mandate that the acquisition of the choppers happen under a government-to-government through the US Foreign Military Sales route.

In addition, the US State Department said recently that it had cleared an Indian request for the sale of an Integrated Air Defence Weapon System for $1.87 billion.

Then, Trump is expected to nudge India to select either Lockheed Martin’s F-16/F-21 or Boeing’s F-18 Super Hornet fighter jets for its Air Force in the upcoming order for 114 combat aircraft. But experts said India will strictly follow standard operating procedures while selecting the jet and is unlikely to be swayed by external pressure on this count.

Convergence on China, Indo-Pacific and Asian security architecture

There is almost complete convergence between India and the US on the need to counter China’s aggressive military and diplomatic postures in Asia and its unilateral declaration of sovereignty over the South China Sea.

This issue, the future of the Quad, the emerging four-nation grouping of democracies comprising India, the US, Japan and Australia, and the importance of ensuring freedom of navigation across all internal waterways including the South China Sea are also expected to be discussed in detail when Modi and Trump meet in less than two weeks.

Kem Chho Trump

The high point of Trump’s visit will be the inauguration of the 125,000-seat Sardar Vallabh Bhai Patel Stadium at Motera in Ahmedabad, Gujarat, which is the largest cricket stadium in the world.

The “Kem Chho, Trump” (How Are You, Trump?) rally planned at the stadium is being billed as Modi’s return gift to Trump for attending the “Howdy Mody” event in Houston last year which was attended by about 50,000 people. Trump has jokingly said he will be disappointed if the crowd is less than 5-7 million since he has got used to addressing crowds of 40,000-50,000. In reality, political rallies in the US usually draw only a fraction of the crowd that attended the “Howdy Mody” rally. Officials said about 100,000-125,000 people will be present at the stadium when the two leaders inaugurate it – which will comfortably make it the largest live crowd Trump has ever addressed.

Shared values to define ties

Experts said the recent tensions in bilateral ties will reduce significantly once the limited trade deal is signed. This will pave the way for a closer strategic clinch between the two biggest democracies in the world based on shared values of freedom, justice, human rights and commitment to the rule of law.

About the Author: Arnab Mitra