Millennium Post

India's standpoint

American unilateralism: a threat to multilateralism and global trade

Indias standpoint

Citing that India has not assured the United States of providing equitable and reasonable access to its markets, the US President Donald Trump terminated India's preferential designation as "a beneficiary developing country for purposes of the Generalized System of Preferences (GSP)". GSP had provided Indian exports with duty exemptions since 1975 and India was its biggest beneficiary. The move came following a prior warning in early March which was then served with a tactical hold till May 23 – result day of Indian general election – in anticipation that India will assure the US of equitable and reasonable access to its markets. Obviously, that did not happen, at least not in the time frame the US expected. Hence, Trump, despite 24 members of the US Congress urging the administration not to terminate India's access to the GSP via a letter sent on May 3, severed India's GSP designation. Trump's decision comes in the backdrop of American antipathy over India's tightening of regulations that have undermined major US companies in the past year, particularly tighter e-commerce rules that came in force earlier this year, hurting and Walmart, which bought Indian online retailer Flipkart for $16 billion in 2018. Washington's aversion clearly reflected in Trump's decision. But the biggest takeaway in this episode was not the American autonomy of trade norms but Indian optimism. In a savage response, India issued a statement asserting that it will continue to seek to build strong economic ties with the United States despite Trump's decision. India further cited that it is "confident that the two nations will continue to work together intensively for further growing these ties in a mutually beneficial manner". India's commerce ministry was of the thought that GSP benefits provided by developed countries such as the US to developing nations like India are unilateral, non-reciprocal and non-discriminatory. India understands that GSP was America's benevolence but its cancellation is America's unilateralism fuelled by distaste. Embroiled in an explicit trade war with China and a proxy war with Iran that has witnessed unprecedented geostrategic developments in past weeks, American decision to deprive India of GSP benefits, however, is not a reflection of enmity. And this was dearly confirmed by Trump's acting Defense Secretary, Pat Shanahan. While addressing the gathering at Shangri-La Dialogue in Singapore, Shanahan expressed the American desire of "increasing the scope, complexity and frequency of its military engagements with India" with an added clause of "maintaining a free and open Indo-Pacific". Shanahan's speech presented bright prospects for Indo-US ties and implicitly resounded growing animosity against China in the region. Not naming China directly, Shanahan said, "some in our region are choosing to act contrary to the principles and norms that have benefited us all". Shanahan's speech was complemented by Pentagon's Indo-Pacific Strategy Report (IPSR-2019). Titled "Preparedness, Partnerships and Promoting a Networked Region", the report heavily emphasised the importance of the US-India strategic partnership. It read that "the US and India continue to use their deepening relationship to build new partnerships within and beyond the Indo-Pacific". IPSR-2019 states that the signing of the Communications, Compatibility and Security Agreement (COMCASA) in 2018 outlines significant development in military-to-military relationship of both nations. It also notifies how the United States and India will conduct their first tri-service exercise later this year. If one looks closely then IPSR-2019 and Shanahan's speech both reflect American ambition to check China's influence in the Indo-Pacific region. Even the Pentagon, on Friday, apprised Congress of how both countries recognise the importance of the Indo-Pacific region to global trade and share a common outlook on the region.

The understated fact is that the US realises India's strategic importance in a region where it has its biggest adversary pulling strings against them almost in a mirrored fashion. The trade war between China and the US has not reached an agreement despite 11 meetings and China moved one step ahead by threatening to cut off sales of rare earth minerals in addition to the 25 per cent tariffs already imposed. The US recently announced anti-dumping duties on Chinese Aluminium. As the trade war soars, benefits can be accrued by other nations like India whose Aluminium exports to the US rose by 58 per cent to $221 million after US and China entered into a trade war. It is likely that the US recognises this collateral implication of its trade war. In the wake of this, American ambition to further cooperations with India is not too hard to comprehend. It should not be forgotten that it is the same United States which brought up CAATSA last year vis-à-vis India's purchase of S-400 missile defence system from Russia or the entire Iranian crude episode where its objective to isolate Iran involved India's commitment to bring their import of Iranian crude to nil. The US, all along, has heavily scrutinised its options while simultaneously understanding regional perspectives to gain insight and hold the upper hand in arguments. But the one thing which the US cannot influence despite its rhetorics like the end of waivers on sanctions or termination of GSP is India's undying commitment in upholding its national interest. The Iran-US imbroglio is definitely having wide ramifications and as far as India is concerned, it brings up the question of strategic autonomy in question. Should India continue to abide by American norms even if they're makeshift in nature to match US benefits? While Europe is deciding its own equation with Iran, knowing that Tehran did not outrightly flout the Iran nuclear deal – the bedrock on which US-Iran war is on – and offering some sympathy by not antagonising Iran, India has reduced its import of Iranian crude down to zero owing to the cancellation of US waiver on sanctions. Should India hold its position and sacrosanct bilateral ties dearer to US whims?

India must acknowledge the fact that the American attempt to inflict another West-Asian crisis is not just a personal vendetta with bilateral ramifications but rather a threat to multilateralism altogether. With a proliferated global footprint, India's global economy is deeply synched to foreign affairs such as Iran-US proxy war or US-China trade war and hence, staunch policies are required to outline Indian stance in a world increasingly indulging in indirect wars.

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