U.S. President Donald Trump, left, and Prime Minister Narendra Modi at the White House in Washington, D.C. (Photographer: Andrew Harrer/Bloomberg)

U.S.-India Ties In 2019: What’s New, Good Or Bad

BloombergQuintOpinion

Relations between the United States and India ended 2018 with a thud. While bilateral trade is up, trade sentiments are down. We secured important new defence agreements at the inaugural ‘2+2 Ministerial Dialogue’ on Sept. 6 in New Delhi. But the departure of U.S. Defense Secretary James Mattis – combined with the continued lack of substance in the ‘Free and Open Indo-Pacific’, raised questions in Delhi.

Since President Donald Trump as well as Prime Minister Narendra Modi conduct diplomacy in a style that relies heavily on the personal equation between leaders, the Bharatiya Janata Party’s weak showing in the recent state elections in India raised renewed questions over Prime Minister Modi’s viability as a long-term partner.

Despite these uncertainties, the governments have teed up multiple steps that will affect bilateral ties.

U.S.-India Ties In 2019: What’s New, Good Or Bad

Positive Changes Set For 2019

U.S.-India CEO Forum

Created in 2005, the CEO Forum’s 40 members are a mix of chief executive officers of American and Indian firms. The forum is meant to act as the highest-level business advisory group to the two governments, highlighting steps the nations should take to unlock greater trade and investment flows. The group was recently reconstituted and will meet for the first time under the Trump Administration, likely in February in New Delhi.

New Tri-Service Exercise

Announced at the Sept. 6 2+2 Ministerial in New Delhi, the new annual exercise—the first involving three services—is expected in 2019. The exact nature has not been divulged, though various officials have referenced participation of our respective special forces, and that exercise would have a strong focus on humanitarian assistance/disaster relief.

The Malabar 2018 trilateral naval exercise involving the United States, Japan and India. (Photograph: Indian Navy)
The Malabar 2018 trilateral naval exercise involving the United States, Japan and India. (Photograph: Indian Navy)

New Officials Leading Ties

The White House recently announced the nomination of Robert Williams to take the role of Assistant Secretary of State for South and Central Asian Affairs —a critical role that's been vacant since the Trump Administration took office. The Indian government has recently appointed its new ambassador to the United States, Harsh Vardhan Shringla. Ambassador Shringla arrived in Washington in early January and presented his credentials to President Trump on January 11.

Completion Of Industrial Security Annex

The U.S. and India are reportedly making good headway in completing an ‘Industrial Security Annex’, which establishes security protocols to allow private firms to work on sensitive defense technology projects.

Possible Negative Changes In 2019

U.S. GSP Review

In April 2018, the Office of the United States Trade Representative announced a review of India’s eligibility for a key trade preference program, the Generalized System of Preferences. GSP provides duty-free imports of certain products from lower-income nations. The USTR triggered this review because of anti-market practices in India related to pharmaceutical patents, medical device price controls, and agriculture market access. No specific date has been given for the USTR’s decision, but talks have broken down.

In addition, India has taken other anti-market steps in areas like data localisation and foreign investment in e-commerce that add fuel to trade policy concerns with India.

U.S. Defense Secretary James Mattis Steps Down

Secretary Mattis has been an ardent supporter of deepening U.S.-India security ties. Such a proactive attitude was crucial following in the footsteps of former Defense Secretary Ashton Carter, who was an unmatched supporter of the relationship. Any reduced level of engagement will be particularly negative.

Prime Minister Narendra Modi and then-U.S. Defence Secretary James Mattis in Singapore on June 2, 2018. (Photograph: PIB)
Prime Minister Narendra Modi and then-U.S. Defence Secretary James Mattis in Singapore on June 2, 2018. (Photograph: PIB)

India’s Retaliatory Tariffs Against U.S. Goods

After the U.S. decision to impose higher tariffs on imported steel and aluminum, India announced its intention to place $235 million in tariffs on 29 American products. India has delayed implementation of these retaliatory tariffs multiple times as trade talks were underway.

U.S. Visa Regulatory Changes

The U.S. government appears poised to rescind an Obama-era executive order that allows spouses of H-1B visa holders to also work, known as the H4 Rule.

Spouses of H-1B visa holders from India are the primary beneficiaries of this H4 Rule, accounting for 93 percent of applications approved as of December 2017.

Iran Sanctions

India reduced oil imports from Iran to avoid U.S. sanctions in November 2018. The U.S. will review these waivers in June 2019, just after India’s national election.

We can hope to see other successful programs revisited in 2019, such as the 2+2 Ministerial, the U.S.-India-Japan Trilateral, the U.S.-India-Australia-Japan Quadrilateral, and the annual Malabar Naval Exercise. Some key bilateral dialogues such as the U.S. Treasury-Indian Finance Ministry ‘Economic and Financial Partnership’ have been dormant and must be revisited immediately.

India’s national election will potentially change the trajectory of U.S.-India ties.

But even before knowing the result of this democratic exercise, we have plenty of issues to track that could alter the trajectory of this crucial relationship in the year ahead.

Richard Rossow is the Wadhwani Chair in U.S. India Policy Studies at The Center for Strategic and International Studies in Washington D.C.

The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team.