India Stands To Benefit From Better U.S.-Russia Ties
America’s aversion to the Trans-Pacific Partnership is positive for India, says Neelam Deo of Gateway House.
Donald Trump hasn’t clearly articulated his foreign policy agenda or approach to South Asia, but when he has spoken he has spoken reasonably fondly of India. Infact, in a bid to woo Indians in America, he was also recently caught on camera saying “Abki baar Trump sarkar” echoing now Prime Minister, Narendra Modi’s campaign slogan.
On trade issues though India, and the loss of U.S. jobs to Indian companies, say in IT, have received negative commentary from Trump.
What then will ‘President Trump’ mean for India? Former ambassador Neelam Deo, now director foreign policy think tank Gateway House, says Trump would make the U.S. a useful ally for India given the border tension with Pakistan, and his stance on trade deals like the Trans-Pacific Partnership and a mega Europe deal could also be positive for the country. There are however, other economic implications that India will need to keep an eye on.
‘Abki baar Trump sarkar’ is a reality now. Is this ‘ache din’ for the world and the United States of America?
I would say that we should look back at India, where Modi promised “ache din”. In some ways it has been the case. The fastest growing large economy in the world is India. For the United States as well, it could be ache din because clearly the desire for change in the United States was very deep. Everybody referred to it and recognised that there was dissatisfaction and unhappiness among the working people etc, but I don’t think anybody recognised how deep and widespread that was. So definitely American people will be looking for ache din.
Do you think it is a gain from a foreign policy point of view and do you think Trump will be able to maintain continuity in the way the U.S. has looked at India?
I think Trump won this election because he was not an agent of continuity, in fact Hillary Clinton declared herself the candidate of continuity and certainly the intensity with which the President Obama campaigned for her would indicate that he was really keen and thought that his own legacy depended on handing over the reins to Hillary Clinton. So we will not see the continuity and you must have seen how nervous stock exchanges around the world were, as also governments. Like stock exchanges, governments don’t like uncertainty, they all like continuity, they all like stability. So I think that the first reaction is clear - one of shock from government, from stock exchanges, from the market. In our country, right now, we are very preoccupied with demonetisation of the Rs 500 and Rs 1,000 currency notes announced by the Prime Minister on Tuesday. But of course this is a very major event, it’s an event of world importance. I think we will only now begin to understand what his policies are because he was not very explicit during his campaign but there was enough said to be able to look at broad directions.
First of all, I think on the economy, two big things. One is, he said that he would reduce taxes for the rich, reduce taxes for corporations. He had said the corporate tax in America is very high compared to other countries. This will be welcomed by businesses in America. Will it mean more growth, will it mean more jobs, that is something that only time will tell. Second, big economic factor that we can begin to look for in January when he takes over will be his promise that on the first day as president he will abolish Obamacare. Obamacare is the big legacy of President Obama, but more than that, we must remember that the medical sector, pharma, hospitals, medical insurance, is something like 10 percent of the U.S. economy. So we are talking about something that is worth $1.5 trillion dollars and whatever changes are brought about there be very consequential. Pharmaceuticals companies actually have lost some value in the markets, so on that we will wait and see how that turns out and what impact it has on the world as a whole because the value of the pharma sector and the whole medical sector in the U.S. economy is massive. Those are the two big economic changes we have to look for immediately.
And then there is trade. He has threatened to levy 45 percent taxes on China by declaring it a currency manipulator. He has threatened 35 percent tax on goods coming in from Mexico. He has spoken about how jobs have gone to India and China and Mexico and Japan. Some of it is scatter short. Some of it may actually have consequences. So certainly our IT industry again, has been very shaky and they are very concerned on what this will mean for H-1B visas because it is linked with the hard positions taken on immigration by Trump in the course of his campaign. And then there is a whole set of global crises situations, on some of which he has spoken and some he has said contradictory things also. So for instance, if you look at his attitude towards China, it is not a very friendly attitude and you know be cannot be very unhappy about. He has been very strong on terrorism and that should show in how the U.S. government deals with Pakistan which is the source of terrorism towards India but also Afghanistan, and towards the United Stated itself. Not only 9/11 but also the recent shooting in California where they attributed it to the fact that one of the men was of Pakistani origin as was his partner. So on that there might be more clarity in the American position now, with him. And then of course is his threat to wipe out ISIS. But at the same time, on that I think we need to look at it in combination with his intent to have a more working relationship with Russia rather than the kind of immense hostility that was shown by the Democrats during the campaign and by Obama. And it is important that there be a working relationship with Russia in order that the intensity of this civil war in Syria be brought down. It is extraordinary that 50 percent of the population of a country has been displaced. If they work together they can certainly do better on wiping out ISIS. But his threat to modify NATO will certainly cause a lot of concern in western Europe and how to modify it whether it is only that he will put pressure on European countries to raise their defence budgets as a percentage of GDP or how. And then there are matters of concern in terms of throwaway remarks on nuclear weapons, whether Japan and South Korea should have their own... I think some of this will get moderated. It is campaign heat and then of course United States has a very larger establishment. We should expect some of the extreme statements will certainly be moderated. But we should look positively on an improvement in U.S.-Russia relations because by putting sanctions on Russia, by pressurising Russia, the West had actually driven it into a much closer relationship with China than is good for us in India.
You seem to have assessed that this is maybe a win for India from the foreign policy point of view. But do we lose in trade what we gain in the foreign policy. Is that going to be the outcome over the next 4-5 years?
I think nothing is clear in trade. One of the other threats Trump has made was that he would pull the United States out of the WTO. I think there will be a period where nobody would quite know how the current trade regime, the global regime will proceed. But from India’s point of view the fact that the Americans will not sign the Trans Pacific Partnership (TPP) agreement is good, we are not a member of that. The fact that they will not sign a mega trade agreement with Europe, is also good for us. Because those are the agreements which raised the standards so much that we are not ready to fulfill those and they would have further constrained our access to European markets and to all the Asian and South American countries that would have been part of TPP. So actually I don’t see it as harming trade. Will it harm some of India’s exports to the United States itself, Yes. I think it will have an initial chilling effect on the IT industry and IT exports to the United States are alone $100 billion for us. But may be it is the shock that IT industry that needs to become more efficient, to move up the value chain, to not be complacent. And will there be any other effect on us? Yes if the global trading regimes are uncertain, are destabilised, it does have a global impact.
The U.S. is currently the engine of growth in the world, even if it is growing only at an anaemic 2 percent rate. Will the U.S. economy continue to recover under President Trump? Or is it going to be an economy that pauses that may be even stagnates?
These are unknowns. I don’t think anybody has a clear answer. I will say two things. One is that Brexit happened. The U.K. economy has suffered but not the rest of the world. In fact, we have the U.K. prime minister here trying to boost trade with India, trying to boost investment from India.
But Brexit hasn’t really happened as yet. The actual process of separation or divorce has yet to take place.
That you are right in a technical sense but as soon as the announcement is made, markets factor that in already. The second thing is that we do know that even though Trump has said that he is going to lower taxes on corporations, we know that not a lot of corporations in the United States contributed to his campaign. We know that the IT industry in the United States did not contribute to and did not align itself with the Trump campaign. So I think they will be in some confusion as well. So I think that there may or may not be something which is specifically India related. But globally uncertainty is always going to cause some kind of disruptions in trade, in the stock markets, in the financial sector as a whole.
What you think the key takeaways of this very surprising victory have been? What does this tells us about where the world is moving, from the point of view of people’s aspirations?
I think two or three things. Everywhere there will be further rise in nationalism, in populism. Right now you have already seen it in western Europe, you have seen it in the Philippines. You have seen nationalist leaders come to the fore in India, in Japan. China, which has declared Xi the core leader etc. So very strong leaders - big men what Africa used to call - I think we will see that even further. We will see a break from globalisation. Because everybody will now want to consolidate their own economies and their own politics before they take any next steps towards globalisation. I think that it will wake up everybody to the deep impact on people’s lives and their sense of themselves of such rising and such high inequality in all countries, between different countries but also within the economy. One percent of the population owns more than 50 percent of the global wealth. That is not sustainable over the long term. I think we will have to have within India, within other countries, some ways to also share wealth more equitably, maybe through government programs. And I think there is finally got to be some sense that change is needed. Things cannot go on as before. The desire for change, the feelings against establishment are very strong. And finally, democracies always say about themselves that every few years when there is an election, it is a corrective. Yes. But the institutions of democracy...in the United States the Congress has been paralysed. In India, a lot of the programs the BJP wanted to bring, they are not able to bring since they did not a have a majority in the Lok Sabha. This is true of parliaments everywhere. But the institutions of democracy themselves need reform. Democracies don’t like to say that but we need to look at that.