A pragmatic problem solving approach to the India-US trade spat is likely to yield New Delhi much greater dividends than an openly confrontational one
The US-China trade war seems to be coming to an end as reports of a possible deal have gathered momentum in recent days. US secretary of state Mike Pompeo has expressed optimism that trade talks with China aimed at ending tariffs on hundreds of billions of dollars worth of products will be successful. Treasury secretary Steven Mnuchin has also suggested that the two sides were getting closer to a trade deal and White House economic adviser Larry Kudlow has underlined that “the progress (between the two countries) has been terrific". Negotiations are reportedly in the last leg as the two sides plan a summit for the end of March at Mar-a-Lago, US President Donald Trump’s Florida resort. Despite the hype, it still remains to be seen if the US-China trade deal actually goes through.
If a deal is reached, the US would roll back tariffs on at least $200 billion in Chinese goods while China would reduce industry-specific levies like those on autos. Meanwhile, China is also gearing up to pass a new foreign investment law to provide a level-playing field to global investors with legal safeguards on Intellectual Property Rights (IPR) and technology transfer, thereby meeting a key demand of the Trump administration. This draft foreign investment law will be submitted to the National People’s Congress of China for review and is likely to be put to vote soon.
The two countries plan to set up a mechanism to hold regular consultations at various levels of the US and Chinese governments to address trade irritants. According to US trade representative Robert Lighthizer, the US will respond with “proportional" and “unilateral" action like tariffs, if talks fail to achieve the desired result. The Trump administration is still debating the wisdom of lifting duties at the start of a deal because keeping some tariffs in place would allow the US to maintain leverage.
The US and China, the two largest global economies, are locked in a trade war since Trump imposed heavy tariffs on imported steel and aluminium items from China in March last year, which led to China imposing tit-for-tat tariffs on billions of dollars worth of American imports.
Though a US-China trade deal would be good news for the global economy facing crises on multiple fronts, it is not readily evident if the structural issues that bedevil US-China trade relations will disappear anytime soon, even with a possible deal. However, the Chinese are essentially pragmatists and have recognized the need to reach a modus vivendi with Trump. Much before Trump made “transactionalism" popular, Beijing’s approach was transactional in more ways than one.
Trump notwithstanding, the strategic logic of Indo-US engagement is quite clear to policy makers on both sides. Given that these are election times, the temptation in India will be to play to the gallery. However, as the Chinese have shown, quiet diplomatic engagement might be the best way forward for India.
A pragmatic problem solving approach is likely to yield New Delhi much greater dividends than an openly confrontational one.
Harsh V. Pant is professor of international relations at King’s College, London.
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