Everyone was on tenterhooks, waiting to see when a free trade agreement between the United States and India would be finalised and what form it would ultimately take. Most believed that India would, in the end, yield to American pressure. However, those who understand Prime Minister Narendra Modi’s temperament and grasp his diplomatic style were confident that India might show some flexibility, but it would never bend. And that is exactly what happened. India played such a master stroke that the United States was compelled, in time, to move towards a free trade agreement.
Just last month, in this very column, I had written about whether Sergio Gore, the new US Ambassador to India, would be able to bring warmth to the relationship. Close to the Trump family and regarded as a powerful figure in the Trump administration, Sergio Gore has now undeniably begun the process of adding warmth to bilateral ties. With the announcement of the free trade agreement, the Trump administration has brought India under an 18% tariff bracket. Earlier, India faced a 25% tariff, along with a 25% penalty for purchasing oil from Russia -- effectively a total tariff burden of 50%, the highest imposed on any country. The current 18% tariff is certainly better than that imposed on Pakistan (19%), Bangladesh and Vietnam (20%), and China (34%).
The detailed contours of this agreement are yet to emerge, but even before the deal was signed, Donald Trump made several announcements by claiming that India would stop buying Russian oil, would do $500 billion worth of trade with the United States and would open its markets to American dairy and agricultural products. These statements sparked concerns, but the Indian government made it clear that its position on agriculture and the dairy sector is firm and unambiguous. Interestingly, while Prime Minister Modi expressed happiness over the agreement and referred to Trump as a friend, he maintained silence on the announcements made by the latter.Prime Minister Modi has used silence in this entire episode as a powerful strategic weapon. He never spoke against Trump. You may recall that on February 13-14 last year, Modi visited the United States and discussions on a trade agreement took place, but no consensus was reached. On April 2, Trump imposed a 10% tariff on nearly 100 countries across the world, including India, and warned that it could be raised to 26%. Several countries succumbed to American pressure and struck deals, but India maintained silence. On July 31, Trump raised the tariff on India to 25%, and on August 7, imposed an additional 25% penalty, taking the total tariff to 50%. Yet India did not criticise Trump. What it did make clear, however, was that no agreement would be signed under tariff pressure.Meanwhile, Team Modi did something that Trump had not even imagined. India began actively searching for new markets for its products. Free trade agreements were signed with the United Kingdom, Oman and New Zealand. That, in itself, was acceptable, but when India signed a free trade agreement with the European Union, the United States realised that the situation was slipping out of its hands. The European Union has 27 member countries, 25 of which use the euro currency. This deal was described as the “Mother of all deals”. It made the US restless, because negotiations with the European Union over this agreement had been going on for the past 20 years. The manner in which Trump tried to intimidate both the European Union and India actually pushed them so rapidly closer that the deal was finalised.
Even before this, by sharing the global stage with Chinese President Xi Jinping and Russian President Vladimir Putin, Prime Minister Modi had sent a clear message that India would move forward on its own terms. It will not sit in anyone’s lap. When Trump invited Modi for a meeting in the United States, he declined because Pakistan’s army chief General Asim Munir was also scheduled to visit the US at the same time. All these developments sent a strong signal to Washington that India cannot be bullied or intimidated. The US also began to fear that it might lose access to India’s vast market. Sergio Gore must certainly have conveyed this reality as well. Despite all the bitterness, India kept the door to dialogue open. Narendra Modi entrusted the responsibility to commerce and industry minister Piyush Goyal. Acting with Chanakya-like acumen, Goyal forged such trade deals with the Arab countries, the European Union and Russia that history will remember. For Goyal, business instincts are clearly inbuilt, which means Modi assigned the right person to the right task. Naturally, external affairs minister S Jaishankar too played a crucial role in this entire process.However, a crucial question remains as to how difficult will it be to erase the line of distrust that has been drawn between the two countries due to this bitterness? The American media is also saying that relations between the two nations had become warm after decades of efforts and this episode has caused significant damage. The United States will have to work very hard to win back India’s trust. And this assessment is correct too. India has always sought good relations with everyone. The biggest proof of this is our decades-long friendship with Russia. If Trump or anyone else expects India to sever its ties with Russia, how is that even possible? Russia is like a brother to us. India believes in a multipolar world and that very outlook is its strength. Let us hope that the line of distrust fades soon. For now, this song comes to mind: Bahut der kar di... huzoor aate aate..!The author is the chairman, Editorial Board of Lokmat Media and former member of Rajya Sabha.