India’s Willingness to Placate Trump Solidifies The Reality of One Planet- Two Trading Systems

As America’s newest and largest major Asian ally, Indian officials could scarcely contain their shock when they discovered that far from receiving preferential treatment in Donald Trump’s global trade war, US tariffs were levelled against India without a second thought. As a result New Delhi launched a complaint to the WTO and has threatened to implement tariffs on US imports beginning in early November of this year.

Yet in spite of the tough talk, India now appears to be engaged in Mexico/Canada style negotiations with the US in order to avoid a tariff war at all costs. Trump described India’s climbdown in the following way,

“India, which is the tariff king, they called us and they said, ‘We want to start negotiations immediately’…Isn’t that nice? Isn’t that nice? It’s true. They have to keep us happy, because they understand that we’re wise to what’s been happening”.

In this sense, Trump’s patronising rhetoric towards India helps to expose the charade implicit in India’s own ‘tough’ rhetoric on US trade as the behind the scenes reality in New Delhi appears to be one of desperation rather than confidence. The path which led India to this Canadian style roadblock wherein policy makers have decided that trade agreements that are extremely preferential towards the US are better than a full scale tariff war is one of India’s own choosing. India truly is the “tariff king” when it comes to neighbouring China, a country that India has conspicuously decided to work against rather than with in the context of pan-Asian economic development. The result of this policy has had a stifling effect on India’s ability to negotiate from the position of  anything resembling an equal when it comes to talks with the United States.

As a result of India’s hostile policies towards China, the country is left with little leverage in discussions with the US and thus a rising Asian economy finds itself boxed into the same corner as other nations and blocs that are effectively dependant on trade of any kind with the US in order to sustain their own domestic economies.

When Chinese President Xi Jinping met Indian Premier Narendra Modi in April of this year in an attempt to reduce tensions between the large neighbouring states, I described Donald Trump and his tariff campaign as being the silent elephant in the room, looming over discussions between the President who spearheaded the Belt and Road trade and inter-connectivity initiative and the Indian Premier who has gone out of his way to heap scorn upon China’s global initiative:

“While China has consistently called on India to embrace the spirit of anti-colonial liberation and join with fellow Asian nations by adopting a win-win  mindset, when it comes to cooperative connectivity initiatives, border disputes and bilateral trade, the Modi government has consistently favoured hostility over holism and confrontation over cooperation.

For many nations, the hostility India has shown China would have already crossed a red-line, but instead, China retains a policy of keeping all doors open for reconciliation with India. For Modi’s part however, things are not so simple. Not only has Modi’s BJP government gone out of its way to provoke disagreements with China across a variety of fronts, but perhaps more importantly, the BJP has engineered, fostered and kindled a Sinophobic attitude in India that now permeates almost all echelons of society. According to the BJP mindset, China is not just a country with which India has disagreements – according to the BJP narrative, China represents a kind of zero sum threat to the cohesion of India, even when the BJP government itself has done more to destroy social cohesion in India than any prior government and has done more to isolate itself from China than China could have ever hoped to do, even if Beijing were to adopt New Delhi’s hostility”.

 

I further wrote that given the fact that US tariffs would hit America’s new friend India even harder than rival China, New Delhi needed to examine its future options in the following way:

“While South Korea and even Japan seek to improve ties with China and with Vietnam moving towards a policy of dialogue regarding the South China Sea dispute, India is increasingly the odd one out when it comes to a multifaceted policy of hostility towards China.

In order to facilitate its policy of hostility towards the world’s most dynamic economy, India has attempted to form partnerships with countries ranging from Japan to some ASEAN nations and the United States. While Japan can do little other than sell India goods it can barely afford including overpriced bullet trains and while few Asian countries including India’s ‘gateway to ASEAN’ Myanmar have indicated a preference for India vis-a-vis China (the opposite is generally true for Myanmar), the US is the real ‘mover and shaker’ behind Modi’s dream of an ‘Asia without China’….

The United States under Donald Trump has intensified the Obama era policy of attempting to turn India into a “security and trade partner” of the United States which in practical terms means that the US is happy to sell India a plethora of arms based on sales strategy that indulges the Sinophobia of many ruling Indian elites.

While both George W. Bush and Barack Obama helped increase bilateral trade between India and the United States, Trump presents a far more complex picture when it comes to trade with any Asian country. Yet there is also another angle to the Trump-Modi tango.

In the early 2000s, when Narendra Modi was Chief Minister of Gujarat, he was banned from entering the US due to gross human rights violations concerning the anti-Muslim pogroms in Gujarat. While Modi’s shift from Gujarat leader to national leader has seen Modi’s brand of Hindutva extremism lead to a rape epidemic and a general atmosphere of violent hostility towards Muslims, other religious minorities, ethnic minorities and Dalits, he is now not only welcomed but openly embraced by Donald Trump and his daughter Ivanka who recently toured India as Modi’s guest.

When it comes to geopolitics, Trump and Modi see eye to eye on many issues. Both are unabashedly pro-“Israel”, both openly harbour anti-Chinese sentiments and perhaps the thing that endears Modi and Trump together more than anything else is an open bigotry towards Muslims.

Because of this, Trump and Modi are in many ways ideological brothers, but then comes the issue of money”

Now it would appear that the penny has dropped and that Modi must now face being targeted by the US for the same reasons that Washington has targeted China. Like China, India is a large Asian nation with a growing economy that runs a trade deficit with the United States. This means that when it comes to tariffs, India will likely not curry favour with the US any more than China simply because Modi has essentially prostituted his government to the US strategy of “Chinese containment” in Asia. Thus far, Washington has not shown any signs of willing to grant India tariff exemptions anymore than this is the case with longstanding allies like Canada, Mexico and the European Union. If anything, while China has leverage to make its retaliatory tariffs against the US meaningful and in so doing, forcing the US back to the negotiating table, India is clearly at a disadvantage in this respect.

While Modi has forsook India’s long standing security partnership with Russia in order to ingratiate himself to Washington and while Modi and Trump both appear to genuinely harbour a worrying hatred of Muslims, when it comes to economics – Modi is in the same boat as China, only this proverbial boat has a much smaller crew than Xi’s.

The world presently stands at major historic crossroads when it comes to re-defining a consensus on global trade. Far from trying to outdo or rival China in terms of being the leader of a new free trade consensus based on respect for the concerns of individual partner nations, the US has instead retreated into a Japanese style of protectionism. America’s one-way street of trade effectively tells potential customers “take it or leave it”. This is to say that while the US is clearly happy to sell its goods to the wider world as is Japan, the concept of trading reciprocity has largely been cast aside under Donald Trump.

In this sense, the world is headed to a place where in spite of broad international trends towards freer trade and multilateralism, because of the overwhelming confidence that the current US administration has placed in protectionism, the future of global trade is likely to develop along the lines of two parallel systems. On the one hand there will be the Chinese model of openness, multilateralism, confidence in bespoke global partnerships and sustainable investment strategies and on the other hand there will be the protectionist US offering the world its goods on a “take it or leave it” unilateral basis. Thus, one can characterise the future of global trade with the phrase: ‘One planet – two systems’…a Chinese one and an American one.

While India could have chosen to remain genuinely independent by making the most of free trade on the open Chinese model and in so doing, actually gain leverage to use in discussions with the United States, by emulating the zero-sum mentality of Washington, India has once again found that it is the very junior partner in its relationship with Washington. As such, Trump’s seemingly humorous description of India begging for a new trading arrangement in order to avoid a tariff war is surprisingly accurate and in fact brutally honest.

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