Tiff over trade

Trump's accusation against India over tariffs doesn't recognise that trade deals should benefit both sides

There is no doubt that India wants a trade deal with the US and president Donald Trump’s Republican administration. But the reasons for doing so as suggested by Trump are clearly at variance with how the Indian government looks at the issue – and it is certainly not about pleasing the US president. His comments at the White House correspondents’ news conference are unbecoming of the position he beholds. Any deal between India and the US must happen on equitable terms and businessman Trump will have to realise that bilateral trade is not a one-way street and there could be a sell-by date for his bullying style of negotiating – with ally and foe alike – as he tries to push his ‘America First’ agenda.

But the US president is keen to have things his way and does not mind a bit of name calling, especially at a time when he believes he is succeeding. The comments on India, whom he described as ‘tariff king’, came against the backdrop of his latest deal: an updated North American trilateral trade pact that also involved Canada and Mexico.

Trump’s angst against India pertains to tariffs on Harley Davidson motorcycles and he said he had spoken to prime minister Narendra Modi who, according to him, had promised to reduce the tariffs “very substantially”. To repeatedly bring up the issue of a single product does not reflect well on the US president. For the record, India slashed duties on the iconic motorcycles by over 50 per cent a few months back as a goodwill gesture. This does not give the US unfettered right to keep putting pressure on India. The US company depends hugely on the Indian and Chinese markets to shore up its bottom line, having seen a huge dip in sales across other markets.

Indeed, Harley Davidson’s managing director Peter Mackenzie was quoted as saying his company has a more promising future in India than back in the US. If that is the case, then the motorcycle maker should consider setting up its manufacturing base in India, leverage costs and optimise manpower to sell better. Importantly, the discourse on trade and investment between the two countries will have to be markedly different and cover a range of products and services while seeking to realise the $500 billion target as early as possible. India’s postponement of additional tariffs on US products as a ‘retaliatory measure’ is definitely not a sign of weakness. Making deals work is the way the Modi government seems to have approached the issue. The US must come half way for the trade and investment deal to be clinched.

In this context, the reverse brain-drain to India from the US of talented technology professionals is a positive sign after the “protective measures” unleashed by a nervous Republican administration. These professionals will have enough work back home while the US industry suffers from want of cost-effective services. Secondly, these technology professionals will find a market to leverage their talent elsewhere in Europe, Japan and other Asian geographies. Thirdly, the barriers set up by the US will, in fact, drive innovation amongst the technology community to keep themselves relevant. President Trump needs to realise that trade and investment relations with India could have a spill over effect on other strategic issues. The two-plus-two dialogue between India and the US was a starting point. President Trump will do well by not frittering away the initial gains made in the first round of negotiations. Meanwhile, the US should realise that deal making should work in the interest of both countries. If Trump is committed to ‘America First’, Modi wants to make a success of ‘Make in India’.