Prime Minister Narendra Modi Saturday returned home to a rousing welcome from BJP party workers and supporters despite not having secured the much-touted trade deal with the US. Also, the issue of Kashmir became further complicated between him and US President Donald Trump despite a massive spectacle of bonhomie between the two leaders at ‘Howdy, Modi!’.
Prime Minister Modi scored clear nil in the most contentious issue of trade during his weeklong trip to America. Trade has undoubtedly become an unavoidable stumbling block in the relationship, even as both sides continue to fiercely fight out trade disputes at the World Trade Organization (WTO).
While it is true that Commerce and Industry Minister Piyush Goyal continues to brainstorm along with US Trade Representative Robert Lighthizer in Washington DC, a so-called ‘limited’ trade deal remains as elusive as it was before Modi’s visit.
No trade deal
When the Modi government came back to power for the second time with a landslide victory earlier this year, the US was clearly not amused. Within days of the government settling into office, the Trump administration cracked the whip on India in May and revoked the trade benefits given under the Generalised System of Preferences (GSP) programme. The US was threatening to do so since before the elections. This was an unprecedented act on US’ part because ever since the GSP programme started in 1974, it was never taken away from India.
It is true that previous US administrations, particularly the Barack Obama administration, did threaten to revoke it, but in reality, it never walked the talk much to India’s relief.
India, on the other hand, whether it was under former Prime Minister Manmohan Singh or under Prime Minister Modi, has always claimed, rather arrogantly, that the withdrawal of GSP did not impact India’s foreign trade much. New Delhi’s public posturing has always been that the GSP, or tariff-free access to US markets for Indian goods, is not really needed as India is not an underdeveloped country anymore.
However, exporters tell a different tale.
Indian shipments under GSP programme get a benefit of around $6.4 billion, which is now gone. It was widely expected that the GSP would be restored during Prime Minister Modi’s trip, and it seemed all the more plausible after ‘Howdy, Modi!’, but eventually it turned out to be a damp squib.
This despite Trump being a “true, warm, friendly and accessible” friend of Modi’s.
Prime Minister Modi was not even able to restore a waiver from US’ high duties on Indian shipments of steel and aluminium during his mega visit.
In March 2018, the US raised duties on Indian exports of steel and aluminium under Section 232 of the US Trade Expansion Act of 1962 on “national security” grounds. Despite several pleas, America has not given India an exemption from it.
Currently, both sides continue to discuss the trade deal and it remains shrouded in secrecy. India has not been able to offer much to the Americans in terms of lowering tariffs on information and communications technology (ICT) products or doing away with price caps on medical devices.
Trade ties under Trump administration have gone from bad to worse. Since 2017, the US has not held its annual dialogue on trade – US-India Trade Policy Forum – with India.
Meanwhile, both sides continue to fight out a plethora of costly cases at the WTO. In fact, in 2017, the US was on the brink of imposing trade sanctions on India through the WTO over a decade-long poultry dispute.
A washout investment roundtable
Let us not forget that the Modi government has anyway been averse to trade since the very beginning. It had reopened all the existing trade agreements that India has with partner countries for a review in his Modi’s first term and the process is still underway.
Prime Minister Modi has been keener on foreign direct investment. Hence, a major highlight of his visit was an investment roundtable organised under the umbrella of ‘Invest India’ where American business honchos participated.
During his weeklong trip, Modi met around 17 American energy conglomerates from the oil and gas sector in Texas and 40 American multinationals from banking to defence, in New York. Even on that front, India was left high and dry as none of the American multinationals that met and applauded “Modi’s vision” yet committed to any big-ticket investment, which could have come as a respite for a slowing Indian economy that is facing rapid job losses.
This at a time when American companies based in China are aggressively looking for greener pastures due to the raging US-China trade war.
Only one MoU was signed between India’s Petronet and American oil and gas major Tellurian Inc. Under this MoU, India’s Petronet will buy 18 per cent equity stake in Tellurian’s proposed Driftwood LNG terminal for $2.5 billion. Both sides will conclude the contract by 31 March next year. So, the promise of $60 billion trade and 50,000 jobs that Modi highlighted as an outcome of the MoU also are castles in the air for now.
Despite pleas about India’s improvement in Ease-of-Doing-Business index and smoother taxation, American investors cited issues such as data localisation, complex taxation and other stringent regulatory processes as hurdles for investing in India.
Kashmir gets further complicated
On the issue of Kashmir, too, Prime Minister Modi could not extract much from his “friend” Trump. While Trump continued the rhetoric of mediating the Kashmir issue between New Delhi and Islamabad unabashedly, the US also demanded “rapid action” in easing restrictions in Jammu Kashmir, and urged India to hold elections at the “earliest opportunity”.
During his bilateral meeting with Modi, President Trump told the Prime Minister that to the US, Iran is a bigger concern as far as terrorism is concerned than Pakistan. He also said in front of Modi that the Prime Minister and his Pakistani counterpart Imran Khan will “get along well” if they meet.
This was the third meeting between Modi and Trump in the Prime Minister’s second term.
But it was an anti-climax when President Trump’s parting shot to PM Modi was: “I think Prime Minister Modi and Prime Minister Khan will get along when they get to know each other. I think a lot of good things will come from that meeting.”