Trump struggles to compete with Beijing’s big spenders

Washington and New Delhi are seeking to finalize a US-India trade agreement before Donald Trump’s two-day trip this month. While the immediate goal for the president is enhancing relations, the important longer-term objective is reinforcing his revamped regional Indo-Pacific strategy in the face of China’s growing strength.

The White House senses a wider, strategic opportunity to embed US regional influence in the Indo-Pacific (the Trump team’s preferred phrase for the massive geography spreading from the US west coast to India)following last May’s landslide re-election of Narendra Modi.

To be sure, some irritants remain, including US threats to impose sanctions if India continues to buy Russian military equipment. The two nations have also been in dispute over the possibility of US restrictions on work visas for Indian professionals in retaliation for New Delhi’s insistence on local data storage by big foreign companies.

Nevertheless, the Trump team is keen to dial up the warmth in the relationship and complete a trade deal. Outlines are emerging in which India would cut duties on more than 40 categories of US exports from applesand almonds to smart watches and other electronic gadgets in return for Washington allowing Indian manufacturers duty-free trade facilities. India is also seeking exemption from US duties on some steel and aluminium products, and resumption of benefits on tariffs on key products under its Generalized System of Preferences.

On the other side of the ledger, Washington wants greater access for its farm and manufacturing products, dairy items and medical devices. India is stalling entry of US dairy products by asserting that US producershave to conform to restrictions on animal feed. Moreover, in the absence of a US-Indian investment treaty, New Delhi is under US pressure to speedily develop a dispute resolution system safeguarding foreign investment.

Whether or not ties are at their best ever level, the relationship has certainly improved over the past generation, and there is significant bipartisan support across the political aisle in Washington in favour of strong US-India ties.

Andrew Hammond

If Trump can secure a trade deal this month, it would build on progress that Washington has made on the security front with New Delhi after India was declared a major US defense partner in 2016. The two countries then signed the Communications Compatibility and Security Agreement in 2018, underpinning greater counter-terrorism and defense cooperation.

The deepening of the US-India strategic relationship is centered on promoting a regional agenda of ensuring “freedom of the seas and skies, promoting market economics, supporting good governance, and insulating sovereign nations from coercion,” with India perceived as a growing regional counterweight to China. In the words of the US State Department: “India is a crucial partner in the Trump administration’s vision for a free and open Indo-Pacific region. It shares our concerns about challenges to our shared interests in the region.”

The deepening of relations is therefore key to bringing greater credibility to this US Indo-Pacific strategy. In India last year, US Secretary of State Mike Pompeo articulated revamped plans for a “new era in US economic commitment to peace and prosperity in the Indo-Pacific region.” However, critics have been underwhelmed by the Trump team’s strategy and assert that it will have less overall impact that the Obama administration’s commitment to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with about a dozen Asia-Pacific states. To be sure, the Trump team has announced alternative plans to pursue bilateral deals, including last September’s deal with Japan, but this has had only limited success.

Added pressure on the White House comes in the form of invidious comparisons of its strategy with China’sambitious $1 trillion Belt and Road scheme, the proposed Free Trade Area of Asia Pacific, and the Regional Comprehensive Economic Partnership championed by Beijing. Inevitably, this has led to concerns about future US influence across the region.

Trump will try again this month to convince India and other US allies that his team is wholly committed —politically, economically and security-wise — to the Indo-Pacific. While this US message will resonate with some, other key players will nonetheless be torn by the massive scale of financial support offered by China, undercutting the effectiveness of Trump’s sale pitch to the region.