US President Barack Obama is under increasing political pressure to pursue protectionist policies. His stimulus package contains “Buy American” provisions, which benefit US steel, iron and manufacturing companies. The spectre of protectionism is a very real threat to India.
Many may recall Obama’s campaign promises of tax penalties for American companies that outsource. As the financial meltdown has only spread, such a move is likely. This would spell disaster for India’s information technology (IT) and IT-related service sectors and resonate more broadly through the economy.
Illustration: Jayachandran / Mint
The Indian business community needs a clear plan to protect, and expand, its business interests with the US. Thankfully, Obama’s stance on lobbying restrictions is mostly symbolic, aimed at closing the revolving door between his administration and lobbyists. Most registered and informal lobbyists are unaffected.
Indian industry must ratchet up efforts through formal lobbying channels. Recent events suggest the new administration is particularly receptive to such advocacy. Look no further than Richard C. Holbrooke, Obama’s envoy to Pakistan and Afghanistan. Obama purged India from Holbrooke’s purview because Indian voices rallied against US involvement in Kashmir. Obama aides did not meet Indian representatives. But his aides were likely influenced by the expensive K-Street lobbyists the Indian government hired. There is no reason why this experience cannot be replicated successfully for promoting business interests.
Last week, Mint reported that Nasscom, India’s software lobbying group, is to visit Obama aides. These formal lobbying efforts are crucial in this climate.
India must also continue to foster a business-friendly climate for transnational firms. If US companies have key markets and operations in India, it will be difficult for Obama to earnestly shutter them. General Electric (GE), for example, opposes import tariffs because it fears such a move will hurt its associations abroad. GE and other large transnationals also have notoriously powerful lobbies.
Indian industry must also pursue all informal advocacy channels at its disposal. Recall the US-India nuclear agreement, where Indian-Americans proved instrumental in informal lobbying. Ties to these communities are key.
It’s still early in Obama’s presidency to determine what lobbying channels will be most efficacious. But Indian industry must intensify efforts to curtail protectionism.
US protectionism: spectre or certainty? Tell us at firstname.lastname@example.org