Trade, tariff issues potential stumbling blocks to growth of India-US partnership: CRS

Trade and tariff issues between India and the US and their divergent approach to ties with Russia, Iran, and Pakistan are potential blocks to the continued development of the bilateral partnership, a US congressional report has said.

India is often called a preeminent actor in the Trump Administration’s strategy for a free and open Indo-Pacific, Congressional Research Service (CRS) said in its latest report. Yet these are potential stumbling blocks to the continued development of the partnership, it said.

The report titled India’s 2019 National Election and Implications for US Interest prepared for the members of the US Congress reviews the recent election process and results, the country’s national political stage, and possible implications for US interests in the areas of bilateral economic and trade relations, defense and security ties, India’s other foreign relations, and human rights concerns.

The CRS is an independent research wing of the US Congress. It periodically prepares reports on issues for members of the Congress to take informed decisions. The CRS reports are not an official view of the Congress.

In its 15-page report dated June 28, the CRS said that, in 2019, differences over trade have become more prominent, and India’s long-standing (and mostly commercial) ties to Russia and Iran may run afoul of US sanctions laws.

“Additionally, India maintains a wariness of US engagement with Pakistan and intentions in Afghanistan, with Islamabad presently facilitating a US-Taliban dialogue and India counseling against a precipitous US withdrawal from Afghanistan,” it said.

“Prime Minister (Narendra) Modi’s return to power promises broad continuity, even with some notable changes to the federal Cabinet. By many accounts, Modi’s record as an economic reformer and liberalizer is mixed, and his reputation as a nationalist watchman has not always translated into effective foreign policy, according to some analysts,” it said.

“It is unclear if Modi will use his renewed domestic political mandate to pursue more assertiveness internationally, possibly in ways that challenge US preferences,” the CRS said. Still, most analysts contend that Modi and the BJP have been and will continue to be more open to aligning with the US regional strategy and more energetic in pursuing the US-favoured economic reforms, said the CRS in its report authored by South Asian Analysts H Alan Hronstadt.

Observing that the Modi-BJP victory has empowered the Indian leader domestically and this may provide Modi and India new opportunities on the global stage, the CRS said that, given Modi’s reputation for favouring a muscular foreign policy, he may now be more willing to resist Chinese assertiveness and move closer to the United States.

“Yet troubles with the United States also could loom: Many Indian strategic thinkers say their country’s national interests are well served by engaging not just with the US but also with Russia and Iran, which could limit to New Delhi’s willingness to abide what some Indian observers describe as Americas short-term impulses,” it said.

While New Delhi generally welcomes the US free and open Indo-Pacific (FOIP) strategy, Indian leaders continue to demur from confronting China. The United States and India also seek to cooperate on energy, climate change, and space issues, and have sometimes clashing views on immigration, the report said.

The CRS warned that a Special 301 investigation against India could raise the risk of protracted bilateral trade tensions and tit-for-tat escalation of tariffs across many economic sectors. Section 301 of the US Trade Act of 1974 authorises the President to take all appropriate action, including retaliation, to obtain the removal of any act, policy, or practice of a foreign government that violates an international trade agreement or is unjustified.

India imposed retaliatory tariffs on 28 US products, including almonds and apples from June 5 after US President Donald Trump revoked its preferential trade privileges.
India had been the biggest beneficiary of the Generalized System of Preferences, a programme designed to help developing countries sell to US consumers.