The Trump administration believes it is now on a roll on trade, with deals last week on US-China and the US-Mexico-Canada Agreement (USMCA). Another deal is close to conclusion with India on a modest package of outcomes to solve several high priority market access problems.
The US-India deal, assuming it is completed, will be hard to build on; although build, the two sides must. As they turn to other areas of trade during the course of 2020, including intellectual property rights and digital trade issues, the United States and India might consider their shared interests in countering China’s unfair trading practices, which is likely to remain a defining challenge over the next decade for them and many other countries around the world.
US negotiators already have been quietly working behind the scenes with the European Union (EU) and Japan to develop a set of agreed proposals inspired by China’s unfair trade practices in the areas of subsidies to and from state-owned enterprises, inadequate intellectual property rights (IPR) protection, and forced technology transfer. This coalition seems to have in mind the possibility of rolling out proposals soon in order to recruit participation and support from other key trading partners. So why shouldn’t the Trump administration consider expanding its bilateral trade cooperation with India to initiate joint efforts on China, which could parallel existing efforts with the EU and Japan and possibly merge with them over time? Might this approach even lead to a new plurilateral negotiation in the World Trade Organization (WTO) that positions it as the most likely venue for tackling Chinese practices over the longer term?
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In fact, the arguments against this kind of approach are numerous:
First, the United States is currently seen as a disrupter in the WTO with its opposition to naming new judges in order to resolve the Appellate Body (AB) crisis. The United States has understandable concerns regarding the overreach of the AB since its creation (with the United States as the strongest advocate) in 1995. But its scorched earth approach, which has now rendered the AB non-operational as of December 11, has created a perception that the United States is bent on undermining and sidelining the WTO. That said, the United States remains active on other WTO fronts, even taking on a leadership role to advance ambitious WTO negotiations on fisheries subsidies and electronic commerce.
Second, there remain legitimate questions about whether the WTO can ever be effective in disciplining China’s non-market behavior given the legacy of China’s accession to the WTO in 2001, which was preceded by years of negotiations specifically focused on formulating an effective set of disciplines customized to fit China’s circumstances. Has anything really changed to suggest that the WTO might be more successful going forward? Presumably initial efforts would have to be plurilateral ones in the WTO that would exclude China from direct involvement in shaping (or denuding) future disciplines. Progress in these plurilateral negotiations is no guarantee that China would eventually sign up, just as the vision dating to the Obama administration that a Trans-Pacific Partnership (TPP) might someday lead to China adopting its strong disciplines was always an uncertain one.
Finally, India would be an unlikely ally in the WTO based on decades of history. The United States has rarely been able to partner with India in the WTO and its predecessor, the General Agreement on Tariffs and Trade (GATT), and they remain at loggerheads across most WTO issues. As the Trump administration persists in its disrupter role in the WTO, India remains stuck in its time-honored “old think” on WTO matters, determined to frame every issue as one pitting developed countries against developing ones when that construct has become less relevant over time (although not completely anachronistic given enduring debates over special treatment for developing countries).
All of these current realities suggest that any chance of a US-India collaboration to confront Chinese behavior on trade is a pipe dream, setting aside the question of whether any approach in the WTO will work, including an initiative authored by the United States, EU, and Japan. However, nothing has really worked yet in fixing the China trade problem, and clearly more ideas need to be brought to the table and greater collaborative efforts undertaken. Perhaps the combination of unilateral US actions, notwithstanding the US-China Phase One agreement, and a plurilateral effort in the WTO that builds steam and grows participation, might lead to a substantial rethink by China of its trade relationships around the world.
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If India were to join this effort down the road, it could be a game changer. India is hugely important to the future of the WTO and it remains hugely preoccupied with its perceived imbalanced trade with China. India is as vulnerable as any other country around the world to a China that does not abide by both the letter and spirit of WTO rules. India recently declined to join the Regional Comprehensive Economic Partnership (RCEP)—a TPP rival—because of its enduring anxieties about opening its markets further to China.
Which brings us back to next steps in the US-India bilateral trade relationship. As the two sides conclude a first agreement and move ahead to take up additional challenges in their relationship, they could do well by initiating in-depth discussions on their shared interests with respect to China. Just as the United States and India continue to build out their strategic relationship, shaped in many respects by China priorities, they might begin to build out their trade relationship beyond the strictly transactional efforts to lower the temperature on bilateral trade problems and consider collaboration on the challenge of China on trade. This effort could well demonstrate that the two countries have more in common than not in seeking new approaches for confronting China on trade.
Mark Linscott is a senior fellow with the Atlantic Council’s South Asia Center. He served as the assistant US trade representative (USTR) for South and Central Asian Affairs from December 2016 to December 2018. He previously served as the assistant US Trade Representative for WTO and Multilateral Affairs from 2012 to 2016 with responsibility for coordinating US trade policies in the WTO.
This article was originally published by the Atlantic Council.