A Trump-Modi Relationship Could Change the Trade World

Taj Mahal in Agra, India. Pixabay/Public domain

New opportunities are on the horizon for the U.S.-India relationship.

In late January, the leader of the United States, the world’s oldest democracy, and the leader of India, the world’s most populous democracy, shared a phone call. Prime Minister Narendra Modi tweeted about the “warm conversation” while the White House issued a statement, which emphasized that the United States considered India to be “a true friend.” In response, Quartz announced the inception of a “bromance,” further positing that President Trump might be “India’s BFF.”

Cute rhetoric. But there’s real reason to expect that the new administration is prepared to bolster the country’s relationship with India. As such, it’s high time to start thinking about how America should move forward with its eleventh-largest goods trading partner.

Trump’s decision to reach out to Modi, which preceded contact with the head of any major European nation, is significant. It’s hardly surprising that the two are simpatico. They come at each other on equal terms—as unrepentant patriots and guardians of economic national interest. (Trump even adopted a version of Modi’s campaign pledge “This time a Trump government” to appeal successfully to Hindu American voters in a viral video). Trump flipped 217 “blue” counties in the election largely by vowing to put “America First,” which meant, among other things, redrafting and tearing up rotten trade deals. The campaign rhetoric has morphed into a governing principle of “Buy American, Hire American.” In 2014, Prime Minister Modi launched Make in India, an initiative “Devised to transform India into a global design and manufacturing hub.” The next year, India attracted $63 billion and replaced China as the top destination for foreign direct investment. Substantial job creation followed.

Trump, despite having been commander in chief for only a few weeks, has also racked up several notable economic feats. He negotiated with Carrier and Ford to keep thousands of jobs from going abroad. He has also brought foreign business ashore. Cao Dewang, a Chinese auto-glass tycoon, recently announced plans to open a factory in Ohio in October—a $6 hundred million investment. He cited Trump’s threat to declare Beijing a currency manipulator and impose a 45 percent tariff on Chinese imports. And in January, the Dow Jones Industrial Average, responding to the dawning of a pro-business age, hit twenty thousand points for the first time.

In short, the U.S. economy, as well as India’s economy, appears to be on a steep ascent out of the post-2008 global economic hangover. Still, there is tremendous opportunity for both countries to benefit—sometimes simultaneously—from a deepened relationship. Americans who supported Trump for his economic agenda should understand there’s a key difference between multilateral free-trade agreements and bilateral cooperation. The former, precisely because of the involvement of multiple countries with diverse interests and capabilities, inevitably requires some “giving,” usually in the form of jobs. The latter, because one-on-one relationships are far simpler,allows two countries to carefully ensure that arrangements are “win-win.” (The Trump administration readily grasps this, having wisely abandoned the Trans-Pacific Partnership.)

Thus far, there’s been a dearth of creative planning in terms of America’s future relationship with India. I am convinced that, by faithfully adhering to President Trump’s commitment to “fair trade,” the administration cannot only triple its trade with India to $300 billion, but also create one million new U.S.-based jobs through increased trade with India within four years. Here are five steps to realizing that goal:

First, the United States should reduce export barriers to India. It’s a leading producer of items that are in great demand in India. To spur American employment, the United States—as opposed to Russia or China—should be the go-to market. India needs at least $10 billion of liquefied natural gas (LNG) per year, $10 billion of advanced defense equipment per year, and billions of dollars worth of high-tech products. A change in legislation, truly the lowest-hanging fruit, could be taken care of within the first one hundred days.

Second, and correspondingly, Washington ought to strike a trade deal with New Delhi that lowers Indian tariffs on American goods and lessens costs on the items they need to import. (America has a 2 percent tariff on imported goods from India, while India has a 10 percent tariff on imported goods from the United States.)