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Can Obama's visit lift India-US trade ties out of gloom?

January 19, 2015 11:11 IST

Prime Minister Narendra Modi shakes hands with US President Barack Obama at the White House. The two shared a 90-minute dinner and got to know each other.

Image: Prime Minister Narendra Modi shakes hands with US President Barack Obama at the White House in September. Photograph: Press Information Bureau.

The visit of United States President Barack Obama to India, as the first American leader to be chief guest at the Republic Day parade, has raised high expectations.

Perhaps too high, as the difficulties that bedevil the United States-India bilateral relationship are difficult indeed to overcome.

While the two countries retain a common view of the world in many ways, and the desire to balance a rising China remains the unspoken lynchpin of ever stronger co-operation between New Delhi and Washington, the many roadblocks in the path cannot be wished away -- especially since these obstacles are essentially a product of bureaucratic slowness and contradictions that are inherent to both capitals.

This, for example, has prevented realisation of potential benefits from the United States-India civilian nuclear agreement -- which certainly exists on paper, but in the absence of enabling last-mile regulations, especially on liability, has not translated into more investments on the ground.

US President Barack Obama travels to the Martin Luther King, Jr Memorial with Prime Minister Narendra Modi of India. Photograph: Pete Souza/White House

Image: Prime Minister Narendra Modi with US President Barack Obama at the White House.

For India, there are several issues on the table.

The long-smouldering demand for a ‘totalisation agreement’, which would ensure that Indian companies do not have to contribute to United States social security for the employees that they send to that country, is one such.

Chief Economic Advisor Arvind Subramanian described these payouts as $3 billion worth of ‘involuntary aid’ from Indians to the United States government.

Several agreements to rule out such contributions have been signed by the United States, and so India thinks it has a good case.

However, all existing totalisation agreements are between the United States and a high-income country that has high-level social security nets and similarly high contributions, and so the United States continues to be resistant to making an exception for India.

US President Barack Obama travels to the Martin Luther King, Jr Memorial with Prime Minister Narendra Modi of India.

Image: US President barack Obama travels to the Martin Luther King, Jr Memorial with Prime Minister Narendra Modi. Photograph: Pete Souza/White House.

But the unfairness of not extending the coverage of such an agreement to India is too obvious to be ignored.

This must be addressed.

Trade issues are also worth pointing out.

The two countries have resolved issues on food security at the World Trade Organization.

But that is not enough.

The United States’ focus is on grand regional trading blocs at the moment, like the Trans-Pacific Partnership.

These will enable harmonisation of regulations across various jurisdictions.

Image: India’s Prime Minister Narendra Modi and United States President Barack Obama discussed a broad range of issues in their recent meeting in the US. Photograph: Paresh Gandhi/Rediff

Image: India’s Prime Minister Narendra Modi and United States President Barack Obama discussed a broad range of issues in their recent meeting in the US. Photograph: Paresh Gandhi/Rediff.com

Increasingly, trade enhancement is not about lowering tariff barriers, but dismantling such regulatory barriers.

India has been left behind on this.

Its best chance is to focus on market access for Indian agriculture, a joint group with a time-bound instruction to harmonise agricultural standards, and to push the United States towards a renewed focus on the global trading system and the Doha Round that India itself did much to slow down.

Now that the United States is emerging from recession, the anti-trade and anti-‘outsourcing’ sentiment that builds up there at times of slow growth may organically die down.

However, in the end, even incremental progress on such issues may not be enough.

When two countries are stuck in a rut such as India and the United States are, a big push is needed to get them out of it.

The two bureaucracies have to be reminded of the strategic value of their partnership, so that the relationship is not bogged down by transactional haggling.

Perhaps, in this respect, a giant step forward in terms of defence co-operation is the best bet.

The atmosphere will undoubtedly be cordial.

But a solid shift in orientation in both countries will need more than that. And once that happens, many other negotiations should fall into place.

BS Bureau in New Delhi
Source: source
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