Harsh Vardhan Shringla, who held a front-row seat in the first Donald Trump administration both as foreign secretary and Indian ambassador to the US, says Prime Minister Narendra Modi’s visit is likely to bolster not only trade, but also the overall bilateral roadmap. He tells Jayanth Jacob that the WTO era could be over. Excerpts:
What is your perspective on the reciprocal tariffs? The preferential tariff systems have been in place for long, with developing countries benefiting from such arrangements. Now, with the US moving towards a reciprocal tariff system, how do you foresee this impacting the dynamics?
The visit on the whole has been comprehensive and trade is one aspect of it. In terms of President Trump’s approach to tariff, it is non-discriminative. Both friends and foes alike have been covered under this. Let’s say, a quest for a certain level of parity in the sense the US has been exploited in terms of its state trading and trade preferences agreements.
I had a ring-side view of President Trump’s first term and my sense is that his approach is that countries like India, Turkey and a number of others are actually developed ones and that they don’t deserve any preferential access to the US market. He wants parity in trade. Like it or not, the US is one of the largest markets for any country, including Canada and Mexico to name a few, in the world. If we have to continue our trade alignments with the US, we have to make necessary adjustments in our approach to bilateral trade. Else, you face the issue of keeping on raising tariffs reciprocally and it’s a zero-sum game.
Are we moving beyond the zero-sum game?
Obviously, nobody wants zero-sum game with a partner like the US. You’ve got to make that adjustments and I think PM Modi’s visit has illustrated amply that we are ready to make adjustments that are necessary, but it has to be on our terms.
How realistic is the target of reaching $500 billion in bilateral trade by 2030?
It is an ambitious target. The current figure is about $140 billion. The multi-sectoral and mutually-beneficial free trade agreement may provide more market access to both countries. Also, it depends on the Trump administration’s relationship with other countries. For example, Trump has already increased tariffs on China by another 10%. He did increase it 25% in his first term in office. So, together you are talking about 35% additional tariff on Chinese products, which gives our exporters a window of opportunity.
If you can’t exploit that 35% margin, then you are not competitive. So you need to exploit that. Our exporters should use this window of opportunity and make best of it. So, there are silver linings in everything. Optimise that window and go for mutually beneficial, partial free trade agreements by September and then work on a comprehensive free trade agreement in a medium to long-term basis. That should be our game plan.
Unlike his previous tenure, this time will be different as far as the trade agreement is concerned?
Definitely. Even when Trump visited India in February 2020, we had the basis for a partial free trade agreement on a “here is where is basis”. In the sense that we would conclude it as it was where it was. We could take whatever we have already agreed and build upon it. We still have another six months to go. We should not get caught up in bureaucratic wrangling and red-tapism.
One area to help bridge the trade deficit is energy cooperation, particularly through increased purchases of oil and gas from the US. But buying oil and gas is tied to geopolitics because shifts in the market could allow India to purchase oil from Russia at a more competitive price…
We are already importing 60%-70% of our energy requirements from abroad. And as a result of that it gives us some leeway to import from various countries. What is important is that we diversify those sources of importing. We don’t depend too much on any one market whether Russia or West Asia. I think what we found is that the US crude oil and LNG are both price-competitive and suit our refineries. There is scope to ramp up those imports, especially if there is possibility of second or third generation sanctions on Russia. In any case, even if we are importing from Russia, there could be scope to diversify.
What could be Trump’s approach to India and the broader US-India relationship this time?
He seems to have re-established his close connection with PM Modi, in a reminiscent of ‘Howdy Modi’ and ‘Namaste Trump’. His memories of India are very warm and positive. Trump remembers that fondly. We need to build on that goodwill by creating synergies between our economies, people-to-people contact in a manner that will take that relationship forward significantly.
The Indo-US nuclear deal was a milestone, but it didn’t quite take off commercially. Now, with discussions around small modular reactors and recent legislative changes in India, do you believe nuclear commerce will gain momentum now?
One of the reasons why the nuclear cooperation didn’t take off despite a special space being carved out for India is that the Nuclear Liability Act made it difficult for American investments to come into the civil nuclear energy sector. There is a commitment in the joint statement to amend that Act and make it suitable for foreign investors. It will bring in a range of American companies on advance nuclear reactors, small modular reactors, normal nuclear energy programmes. I think that’s the key considering that in our green energy mix, nuclear is going to be very important. You cannot run your grid based on solar and wind energy. You have to bring in nuclear energy.