India INC The US closes the door on reinstating India’s GSP benefits
Kashish Parpiani
The following article originally appeared in India INC on March 12, 2020

The Trump administration has adopted punitive measures to weaken India’s justification for barriers owing to its developing economy status.

A day after Trump’s visit dates were announced, the United States Trade Representative (USTR) released a notice on eliminating a list of countries from its methodology for countervailing duty (CVD) investigations. India was removed from the list of developing countries that “are exempt from investigations into whether they harm American industry with unfairly subsidised exports.”

The move came amidst US-India trade tensions reaching a crescendo. As US-India trade negotiations have stalled, the Trump administration has levied steel and aluminium tariffs on India, revoked India’s benefits under the Generalised System of Preferences (GSP) programme, contemplated limiting Indians’ H1-B visas quota to 15 per cent due to divergences on e-commerce policy, and raised the spectre of a Section 301 investigation into India’s tariff/non-tariff barriers.

During the ongoing visit, the expectation for India had been to oversee partial/complete restoration of its GSP benefits. After the 2019 general elections in India, the Trump administration had ended India’s status under the GSP. Until then, India had been the biggest beneficiary of the programme, with exports to the US accounting for “over a quarter of the goods that got duty-free access into the US in 2017.” Over 12 per cent (worth $5.58 billion) of all Indian exports to the US in 2017 had benefitted under the GSP scheme. However, with the aforementioned move to remove India from the CVD list, the US essentially closed the door on reinstating India’s GSP benefits, since the same is a preferential arrangement only for developing countries.

The Trump administration’s contention over India’s developing economy status can be understood through another source of tension in ongoing trade talks.

India has instituted price caps on the US’ pharmaceutical imports, which led to the lowering of prices of coronary stents and knee implants by 85 per cent and 65 per cent respectively. India has justified the same as an attempt to prevent exorbitant pricing from affecting the Indian consumer – which mostly comprises of a middle-income base. In ensuring fair returns for US manufacturers, India has directed them to its large market, away from per-unit margin considerations. American negotiators, however, insist on a “trade margin” at the first point of sale, instead of landed cost.

For the US, India’s reasoning sound much like China’s when the latter acquired the US’ MFN status via the Permanent Normal Trade Relations Act of 2000 by offering access to its large market. However, with China, America’s experience of giving up unit margins has not been encouraging. Riding on its predatory practices, theft of intellectual property and state-driven market economics, China has now become a near-peer economic competitor to the US. Much of India’s argument for price caps on pharmaceutical imports relies on its status as a developing country, i.e. “to maintain higher levels of protection as compared to the developed countries.”

Thus, the USTR’s review – and now the termination – of India’s designation as a beneficiary “developing” country reflects a strategy to weaken India’s justification for barriers owing to its developing economy status.

India INC The centrality of American bipartisanship for US-India defence ties
Kashish Parpiani
The following article originally appeared in India INC on October 11, 2019

As political polarisation impairs the bipartisan fervour of US foreign policy, New Delhi must adhere to its non-partisan approach to Washington.

Early this month, India’s External Affairs Minister S. Jaishankar deemed India to have “a very nonpartisan” outlook towards the United States’ domestic politics. While on a three-day visit to the US, Jaishankar underscored India’s approach as: “whatever happens in this country [US] is their politics, not our politics.”

These comments came in response to sharp political criticism of the ‘Howdy, Modi!’ rally in Houston, Texas. Held in late September, the event featured Indian Prime Minister Narendra Modi and US President Donald Trump addressing a crowd of over 50,000 Indian Americans. Given Trump’s political arithmetic on Indian Americans in context of his re-election bid, the Indian National Congress (INC) – the primary political opposition to Modi’s Bhartiya Janata Party (BJP) – alleged the event to have “violated the time-honoured principle of Indian foreign policy of not interfering in the domestic elections of another country.”

As the 2020 election season takes off, it remains to be seen if Trump’s appearance alongside the popular Indian Prime Minister will bear political fruit in the emergent battleground state of Texas – home to nearly 270,000 Indian Americans. Beyond the political optics of the rally, however, the centrality of defence ties in the broader trajectory of the US-India dynamic was writ large.

The Modi impetus to US-India defence ties

At the ‘Howdy, Modi!’ rally, Trump announced the first-ever US-India tri-service military exercise. Slated for coming November, Trump said the military exercise – codenamed “Tiger Triumph”, will “demonstrate a dramatic progress of our [US-India] defence relationship.”

The announcement significantly came at a time when Indian, American and Japanese navies were coming together off the coast of Sasebo (Japan) for the trilateral Malabar maritime exercise.

The announcement thus, stood as a testament to the rising US-India trajectory on force interoperability as India conducts “more joint military drills, tabletop exercises, and defence dialogues with the US than with any other country, which include more than 50 ‘cooperative events across all Services’ annually.”

Under Modi, the impetus to US-India defence ties has been unprecedented. Consider the fact that since the final year of the Obama administration, the Modi dispensation has ramped up the pace of inking defence interoperability pacts with the US. In its first term starting in 2014, the Modi government put in force the Logistics Exchange Memorandum of Agreement (LEMOA). Signed with the outgoing Obama administration in 2016, the same pertained to “reciprocal provision of logistic support, supplies, and services” between Indian and American armed forces. Thereafter, a year into the Trump administration, the Modi government signed the Communications Compatibility and Security Agreement (COMCASA). This second US-India defence interoperability pact pertained to “access to advanced defence systems and enable India to optimally utilise its existing US-origin platforms.” Furthermore, after Modi got re-elected in 2019, the US and India are now reportedly ironing out differences on the final interoperability agreement – the Basic Exchange and Cooperation Agreement (BECA), on joint access of geospatial maps.

The rising tempo of developments on this front has indicated the Modi government’s strong inclination to pursue “platform synchronisation via these formal agreements – that mostly pertain to technicalities like geospatial mapping and communications, supplementing the operational synchronisation at play during US-India military exercises.”

Further developments on this front, however, stand susceptible to the intense polarisation now impairing the bipartisan fervour of US foreign policy.

American foreign policy in the age of fractured bipartisanship

American foreign policy has traditionally functioned under the Vandenberg dictum of stopping “partisan politics at the water’s edge”. Through the Cold War and thereafter, the same forged an iron-clad bipartisan consensus on some tenets of US foreign and security policy. These included, the continued American promotion of liberal Wilsonian values, encouraging the sustenance of an Open Door global economic system, underwriting the security of its allies around the world, and sustaining outmatched US military spending.

With possibly the sole exception of the final tenet – as the US earmarked a record $716 billion as defence budget for fiscal year 2019, the rise of conservative nationalism has spurred an abhorrence towards the United States’ “indispensable” role in the world.

Moreover, this conception of American foreign policy thought, currently encapsulated by Trump’s ‘America First’ worldview, has exacerbated domestic political polarisation. The extent to which this partisanship animates contemporary US foreign policy has put partner nations that once enjoyed unquestionable bipartisanship under considerable strain.

For instance, with Democrats drumming up impeachment over Trump’s alleged strong-arming of Ukrainian President Volodymyr Zelensky to investigate former US Vice President Joe Biden, Kiev risks becoming a partisan sticking point. Ukraine has enjoyed bipartisan support in terms of receiving aid and military equipment against Russian aggression. With the Zelensky government possibly paying heed to Trump’s requests, however, it “cannot risk alienating Democrats in case they win the presidential election. Seeming to favour either side risks turning Ukraine into a partisan issue in which it is seen to be an ally of one side or the other.” Similarly, even Israel is emerging as a fault line between Republicans and Democrats. As the core of the Democratic Party shifts further to the left, its emerging faces like Rep. Ilhan Omar (D-MN-05) and Rep. Rashida Tlaib (D-MI-13) have come under fire. Their criticism of Israel’s treatment of Palestinians and underscoring the supposed overt influence of the Jewish lobby in US politics has ratcheted up American partisanship. Most notably, Trump and the Republicans have construed the Democrats as being anti-Semitic and even accused them of being anti-Israel.

In this developing partisan context, India cannot afford to lose the bipartisan fervour it currently enjoys. Especially, with regards to the discussed elevation under Modi of US-India force interoperability, its complementing facet of US-India defence trade crucially rests on continued bipartisanship support for India on the Capitol Hill.

Road to US-India defence ties passes through the (Capitol) Hill

Support for India and US-India ties is apparent on the Capitol Hill. In the US House of Representatives, the Congressional Caucus on India and Indian Americans is the largest country-specific caucus. In the US Senate, the India Caucus is the only country-specific caucus. As a testament to their role, even before the George W. Bush administration sought the recalibration of American opposition to India’s nuclear programme, influential members of the India caucuses were paving way for contemporary US-India ties.

The S.1886 – Naval Vessels Transfer Act of 2005 by the bipartisan pair of Sen. Richard Lugar (R-IN) and Sen. Joe Biden (D-DE) for instance, led to India’s acquisition of the first US-built warship – the Austin class amphibious transport dock ship Trenton. Thereafter, with bipartisan co-sponsorship by Congressional heavyweights like Rep. Eliot Engel (D-NY-17) and Rep. Ileana Ros-Lehtinen (R-FL-18), exemptions for India under the Atomic Energy Act of 1954, were put in place with the H.R.5682 – Henry J. Hyde United States and India Nuclear Cooperation Promotion Act of 2006.

Since having this crucial component of the US-India Civil Nuclear Agreement in place, an exclusive bipartisan focus on India’s defence capacity-building has been underway at the Capitol Hill – towards gradually laying the legislative foundation stones for US-India defence trade. Some recent actions by current or former members of the bipartisan India caucuses on the Hill include, directing the American executive to grant India the status of ‘Major Defence Partner’, according to India with Strategic Trade Authorisation – I, expanding the Indo-Pacific Maritime Security Initiative to also include India as a fund recipient country, and amending Section 231 of Countering America’s Adversaries Through Sanctions Act (CAATSA) to include waiver provisions for India.

Going forward, this continued bipartisan effort to further institutionalise US-India defence ties in legislative precedents is going to be key. For instance, the ongoing Congressional effort to designate India with ‘Major Non-NATO Ally’ (MNNA) status is going to be key for the transfer of sensitive technologies like Unmanned Aerial Systems.

Hence, as political polarisation impairs the traditional bipartisan character of American foreign policy, New Delhi must continue to adhere to its non-partisan approach to Washington.