NEW DELHI – The United States is placing India at the center of its ambitions to separate global supply chains from the clutches of American rivals, seeking to forge ties with one of the world’s fastest-growing economies as tensions with China remain high and Russia’s war in Ukraine fuels international trade.
Treasury Secretary Janet L. Yellen, the Biden administration’s top economic diplomat, delivered that message personally on Friday during a visit to the Indian capital at a time of global economic uncertainty. Rising food and energy prices stemming from Russia’s war and growing concerns about America’s reliance on Chinese products have prompted the United States to try to reshape the global economic order so that Allies depend on each other for the goods and services that power their economies.
India usually in the midst of geopolitical jostling between the United States, China and Russia. But as the Biden administration pushes for what it calls “friendship,” it’s clear that it wants India to be in the orbit of America’s economic ally.
After a tour of Microsoft’s research and development campus on the outskirts of New Delhi on Friday, Yellen outlined the case for a diversion away from countries that could destabilize US supply chains and away from suppliers. production with little regard for human life. Obviously China and Russia are the top priorities.
“The United States is pursuing a so-called ‘friendship’ approach to diversify away from countries that pose geopolitical and security risks to our supply chains,” Yellen said. “To do so, we are proactively deepening our deep economic integration with trusted trading partners like India.”
Microsoft’s growing operations in India are an example of the integration the United States wants to see. Yellen noted that the US development finance agency is providing an American solar producer with $500 million in funding to build a facility in the southern Indian state of Tamil Nadu. It’s part of the administration’s effort to help the world’s solar industry move away from China, Yellen said. manufactures solar panels using forced labor in its Xinjiang region. And she highlighted Apple’s recent shift to shift iPhone production from China to India.
“We are also tackling the issue of reliance on manufacturers whose approach is in conflict with our human rights values,” said Yellen, who traveled to India before attending the summit. G20 leaders in Indonesia next week, added.
The importance of America’s relationship with India has grown in recent months. The country is a rare ally that maintains strong diplomatic ties with Russia, which has become Russia’s top oil supplier and is influential with President Vladimir V. Putin. At the same time, India’s large English-speaking population has the potential to turn the country into an international manufacturing hub for American companies. The United States is India’s largest trading partner overall.
But commercial relationships are not always easy. American officials say their Indian counterparts are among the toughest negotiators, known for clinging to protectionist impulses at international meetings. And given the challenges of doing business in India, including a lack of infrastructure and government restrictions, it’s unclear how many manufacturers will make the jump from China.
Sadanand Dhume, a senior fellow at the American Enterprise Institute, said India faces a number of challenges in becoming an international manufacturing hub, including government reforms that have not been “significant”. making India a more attractive destination for companies. And compared to China, India’s domestic consumer market is smaller and therefore less attractive to companies that manufacture there.
India emerged as a significant obstacle as members of the World Trade Organization try to reach a series of agreements at this year’s meeting. It has also declined to join negotiations on the trade pillar of the Indo-Pacific Economic Forum, an Asia-Pacific Economic Treaty proposed by the Biden administration.
Over the past few months, India’s longstanding economic relationship with Russia has become increasingly problematic for the United States. India is the world’s largest buyer of Russian weapons – a relationship that is difficult to sever, especially given India’s tensions with its neighbors China and Pakistan. India has refused to condemn Russia’s invasion of Ukraine. And since the war began, it has been a major buyer of Russian oil, which it can buy on the international market at a discount.
India imports from Russia increased 430 percent since the war in Ukraine began in February, when Russian crude oil tankers poured into Indian ports. India, which imports a significant amount of energy and is the world’s second most populous country, says it is focused solely on buying oil at the lowest price.
Eswar Prasad, a trade policymaker at Cornell University who has spoken to both US and Indian officials, said that although India wants to establish stronger economic ties with the US, it This country can hardly be separated from Russia.
“India has a very deep economic interest in maintaining a reliable and relatively cheap supply of oil from Russia,” said Prasad, a former official at the International Monetary Fund.
The US embrace of India comes as the US and its European allies are racing to fulfill the terms of Russia’s plan to cap oil prices. The initiative must be implemented by December 5, when the European embargo and marine insurance will come into effect, potentially disrupting the flow of Russian oil around the world.
The price cap would essentially create an exception to Western sanctions, allowing Russian oil to be sold and shipped as long as oil remains below a certain price, a level yet to be determined. determined.
India has been cautious about the proposal, but Treasury officials say the United States is not trying to push the country to officially join its union. Instead, they hope that India will use the price cap as leverage to negotiate lower prices with Russia, depriving Putin of revenue but keeping the nation’s oil flowing.
However, Yellen emphasized in her speech that relying on Russian oil comes with risks.
“Russia has long presented itself as a reliable energy partner,” Yellen said. “But for the better part of this year, Putin has weaponized Russia’s natural gas supplies against the people of Europe.
The Treasury Secretary added: “It is an example of how malicious actors can use their market positions to try to gain geopolitical leverage or disrupt trade for the benefit of others. themselves.”
Noting India’s economic relationship with Russia, the United States has focused on other areas where it can cooperate. India has strong agricultural and service sectors, but the United States believes it has considerable room to expand its manufacturing capacity.
Atul Keshap, President of the US-India Business Council, said there are many opportunities for economic partnership between the US and India, especially in establishing a secure supply chain for companies. strategic technologies such as semiconductors, electric vehicle batteries, artificial intelligence, quantum computing. and unmanned aircraft.
“You look at the headlines, you look at the risk to the supply chain,” Mr. Keshap said. “You look at the turmoil of the last two or three years, and countries like India have an opportunity.”
However, business leaders and trade experts say the US and Indian governments have so far failed to recognize those opportunities. Negotiating a trade deal with India bloom in a short time during the Trump administration, but a host of economic problems persisted – from India’s barriers to American agricultural goods and medical equipment to the country’s lack of intellectual property protection. America – has made any deal difficult to reach.
A U.S. program to reduce tariffs on imports from poorer countries, including India, Expires in 2020and there was not enough support in Congress to restore it. In a 2021 trade meeting in New DelhiThe parties have made some progress in opening up trade for US pork, Indian cherries and alfalfa hay, mangoes and pomegranates.
US-India Trade Policy Forum keep an eye on November 8 A representative from the Office of the US Trade Representative said it was pushed back to give officials more time to achieve more substantive results.
Speaking to reporters on the sidelines of Friday’s meeting, Yellen said tariff reductions were not currently in discussions with India, but the two sides discussed measures to “facilitate trade.” other to reduce non-tariff barriers. .
According to Mr. Prasad, who is also a former IMF official, there is still skepticism about the sustainability of US good intentions in India in the aftermath of the tariffs enacted by former President Donald J. Trump.
“There is a layer of apprehension, if not total distrust, in Delhi,” Mr. Prasad said.
Ms. Yellen came to India to show that, despite their differences, the United States can be a reliable partner. On Friday, she also met with India’s finance minister, Nirmala Sitharaman.
“Our strong trade, investment and people-to-people exchanges make the bilateral economic and financial relationship an important element of that partnership,” Ms. Yellen said. with Mrs. Sitharaman by her side.
Sitharaman said the strength of the relationship between the two countries is based on understanding each other’s needs and “respecting differences”.
Speaking to Indian business leaders at the meeting, Yellen said major democracies like India and the United States must stick together in a volatile global economy.
“In a world where vulnerabilities in the supply chain can cause heavy costs, we believe it is important to strengthen trade relations with India and a large number of countries,” she said. share the same approach to economic relations with us.”
