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International relations

India readies to fete Trump but big trade deal not on the table

Multibillion dollar arms pact expected to sweeten president's Feb 24-25 visit

Indian Prime Minister Narendra Modi, left, attends the September 2019 "Howdy Modi" event with U.S. President Donald Trump in the American state of Texas.   © Reuters

NEW DELHI -- Against a backdrop of strained economic ties, U.S. President Donald Trump is set to visit India next week to try to resolve differences over a slew of trade issues and perhaps land some big defense deals.

A comprehensive trade deal with India, however, is not in the cards during the Feb. 24-25 visit.

"We can have a trade deal with India, but I'm saving the big deal for later on," Trump told reporters in Washington. "We are doing a very big trade deal with India. We will have it [but] I don't know if it will be done before the election."

Trade tensions between the two countries have been on the rise since Trump took office in 2017. Labeling India the "tariff king," the president has repeatedly highlighted the country's steep import duties on America's Harley-Davidson motorcycles. New Delhi has slashed levies by half to 50% but Trump remains unhappy. He wants zero duties.

Despite Trump's tariff tantrum, the U.S. is not averse to imposing taxes, having slapped higher levies on imports of Indian steel and aluminum. The world's largest economy also ended preferential duty-free imports on $6 billion worth of Indian goods last year.

Washington's moves followed New Delhi's price caps on medical devices, such as coronary stents and knee implants, while declaring new data localization requirements, which India sees as necessary to end "data colonization" by foreign companies but which the U.S. decries as a barrier to bilateral digital trade.

A worker observes an electric furnace inside a steel factory on the outskirts of Jammu.    © Reuters

After being denied decades-old preferential tariff treatment, India retaliated by slapping levies on some U.S. products, including almonds and apples, prompting Trump to slam New Delhi's action as "unacceptable."

"We're not treated very well by India, but I happen to like Prime Minister [Narendra] Modi a lot," Trump said on Tuesday.

Regarding Trump's comments, Indian External Affairs Ministry spokesperson Raveesh Kumar told reporters on Thursday that it was important to understand the context under which the remarks were made.

"I think the context was in terms of the balance of trade," Kumar said. "In the last few years, efforts have been made by India to address this particular concern, and now the U.S. is our sixth-largest source of crude oil imports. We are also purchasing a large number of civilian aircraft and feel that some of these steps will bridge the trade deficit."

As to the prospects of a comprehensive trade agreement, Kumar was noncommittal: "We would not like to rush into a deal as ... there are many decisions which actually could impact millions of people on the ground, and some also [come] with long-term economic consequences. So, we don't want to create an artificial deadline."

Washington and New Delhi have been trying to resolve their differences but have little to show, according to official sources.

India has been demanding exemption from high tariffs on steel and aluminum products, restoration of preferential treatment under Washington's Generalized System of Preferences, and market access for its farm products. For its part, the U.S. insists that India open its agriculture sector, in particular to dairy products. "Neither side has yielded much so far," one source said.

Many analysts do not foresee any major progress during the visit. "If there are any trade talks or agreements, they will be very limited [and] will only aim to stave off immediate challenges," said Harsh V. Pant, head of strategic studies at the New Delhi-based Observer Research Foundation. "A set of parameters or broad framework may be declared, within which the two leaders will have to find a way to resolve disputes."

India cannot allow market access for U.S. dairy products and other processed food items. It first must look after the interests of Indian farmers, which are a major voting bloc. In addition, several key states are set to hold elections in a few years, according to Pankaj Jha, associate professor at the O.P. Jindal Global University in the state of Haryana.

New Delhi has been highly protective of its farmers in trade negotiations with Australia and members of the Regional Comprehensive Economic Partnership, from which India withdrew in November.

According to Jha, India is loathe to concede much to Trump, as the president is nearing the end of his first term in office. "[If] Trump doesn't win again, then whoever comes next will put this relationship into cold storage for one or two years," Jha said.

Finishing touches are applied to paintings of Trump and Modi as part of beautification efforts along a route in Ahmedabad the two will take during Trump's upcoming visit.   © Reuters

On the defense front, however, analysts are confident that major deals will be announced. Defense has become "one of the central drivers" of the bilateral engagement, Pant said, adding that deals worth $3.5 billion to $4 billion are in the pipeline.

On Wednesday, local media reported that the Indian government has approved a $2.6-billion deal to buy 24 Lockheed Martin-made helicopters from the U.S., setting it up as one of the key achievements during Trump-Modi talks scheduled for Feb. 25.

"The U.S. wants a big slice of the Indian defense sector," said Jha, adding that the two sides are also expected to discuss joint production of F-21 fighter jets in India. "Trump will try to elevate his stature by securing more defense orders from India."

The president will be accompanied on his visit by first lady Melania. The two will travel to the city of Ahmedabad in Modi's home state of Gujarat, then visit the iconic Taj Mahal before going to New Delhi.

Indian Foreign Secretary Harsh Vardhan Shringla said the 36-hour trip will be "brief but intense."

On Feb. 24, Trump will address the "Namaste [Hello] Trump" event with Modi at the new Motera cricket stadium in Ahmedabad -- the world's largest with a seating capacity of over 100,000. It will be repayment in kind to the "Howdy, Modi!" event the prime minister attended last year in Houston, in which Trump also participated. The event was attended by 50,000 Indian-Americans and showed how popular Modi is in the community.

Trump is looking forward to visiting Gujarat, and said he has been told there will be seven million people on hand to greet him between the airport and the stadium. "It's going to be very exciting," he said.

The visit to Ahmedabad appears to be a well-calculated ploy by Trump to woo Indian-American voters in the U.S. "Trump wants to mobilize Indian-Americans for the November election," Jha said, observing that Indians from Gujarat are "very moneyed people" in the U.S. and Trump is trying to reach out to them.

Additional reporting by Nupur Shaw

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