20 | http://www.nationalreview.com MARCH 23 , 2020that could become a broader upheaval. The
biggest story out of India during Trump’s
visit was attacks by Hindus against
Muslims who were protesting a new citi-
zenship law—the last in a series of nativist
measures that have rolled back social
progress in India. Modi’s assault on reli-
gious freedom may permanently taint
Indian democracy.
If the Indian government corrects
course, the country is well positioned to
grow by liberalization rather than central
planning. Its dependency ratio—the pro-
portion of children and the aged relative to
the working-age population—is projected
to shrink to 47 percent by 2050, when
China’s will hit 63 percent. Moreover,
India sorely lacks the high-quality infra-
structure that exists in China. Inadequate
infrastructure is low-hanging fruit for the
Modi government, which need only make
room for private-sector investment. And if
it enters the multilateral trading system in
earnest, India will boost its subpar export
numbers and streamline domestic produc-
tion with more competition.
In the run-up to Trump’s visit, officials on
both sides had hinted at a “phase one” trade
deal that would roll back some tariffs and
pave the way for a broader free-trade agree-
ment. Though that didn’t happen, the two
sides committed to concluding the current
round of negotiations promptly. Trump’s
love for tariffs makes negotiating with India
difficult: the president has little credibility
to dissuade Modi from protectionism. But
observers still expect a trade truce in the
near future. For that truce to become a free-
trade agreement, the two sides will have to
prioritize addressing the Chinese threat over
playing to their political bases.
There is a difference “between a nation
that seeks power through coercion” and one
“that rises by setting its people free.... And
that is India,” Trump said during his visit,
extolling the “natural, beautiful, enduring
friendship” between India and the U.S.
That free nations prosper remains critical
to world order. Beijing is determined to
prove the superiority of its development
model; its increasing belligerence has
starkly demonstrated the choices facing
the developing world. However challeng-
ing, an upgraded U.S.–India relationship
remains possible. Consummate populists
though they are, Modi and Trump have an
opportunity to build a future for the free
world—one that channels national griev-
ances toward the pursuit of shared interna-
tional interests.India and China depend on energy re -
sources transported through the sea-lanes of
the Indian Ocean, control of the region’s
infrastructure and trade routes is of utmost
strategic importance. On land, border dis-
putes persist: In 2017, China’s attempt to
build a road through Doklam, on the border
of India’s ally Bhutan, led to a two-month
military standoff between the two countries.
These simmering tensions provided the
backdrop for the meetings between Trump
and Modi in late February. Modi rolled out
the red carpet for his fellow populist,
hosting an extravagant state dinner and
parading Trump around the Taj Mahal.
The “Namaste Trump” rally held at the
world’s largest cricket stadium, in
Ahmedabad, drew a crowd of 125,000.
The two sides announced an expanded
defense partnership, including $3 billion
in arms sales. With the Indian military
largely reliant on Russia, Delhi’s purchase
of American helicopters points to a belat-
ed reorientation of India’s Cold War
alignment. For its part, the White House’s
agreement to transfer sensitive military
technology to Delhi is a sign of trust in the
Modi government. The deal also includes
industrial collaboration and—in a rebuke
of Chinese telecommunications giant
Huawei—collaboration on 5G networks.
The announcement fits into the Trump
administration’s policy of a “free and open
Indo-Pacific,” which sees the Indian and
Pacific Oceans as a “single strategic arena”
in the ongoing confrontation with China.
Twice in the past two years, the White
House has held high-level discussions
with Indian defense officials, in addition to
reviving “the Quad”—an informal strate-
gic dialogue among the two countries,
Australia, and Japan.
China has taken note, but much as in the
1960s, competition between Delhi and
Beijing remains most consequential on the
ideological rather than the military front.
The Chinese have largely avoided respond-
ing to India’s strategic realignment, in
order not to lend credibility to India’s
democratic system. Georgetown professor
Oriana Skylar Mastro argues that con-
fronting India would undermine the CCP’s
assertion that “there is no developing coun-
try in the world that achieves prosperity
and stability under Western-style democ-
racy.” Economic supremacy outranks mil-
itary strength in the Indo-Pacific struggle.
But on the critical economic front, the
U.S.–India relationship has deteriorated. In
May 2019, the White House stripped Indiaof its preferential trading status under the
Generalized System of Preferences,
which had exempted Indian imports to the
U.S. from billions of dollars in tariffs. New
U.S. tariffs on steel and aluminum, which
reduced Indian exports of steel products by
46 percent, drew retaliation from Modi.
At the 2018 World Economic Forum in
Davos, Modi cautioned world leaders
against protectionism, saying, “Many
countries are becoming inward focused
and globalization is shrinking, and such
tendencies can’t be considered lesser risks
than terrorism or climate change.” Yet his
government has steadfastly rolled back
the slow liberalization of trade that took
place under its predecessors.
India’s Most Favored Nation applied tar-
iff rate is the highest of any major econo-
my, and that rate has increased over the past
two years. Modi’s 2018 budget raised
duties by up to 20 percent on items ranging
from auto parts to toiletries. While the
country had previously made progress in
unifying tariff rates across products—
which streamlines customs and reduces
uncertainty for importers—the Modi gov-
ernment’s incoherent, ad hoc approach
has created huge variation in duties. The
country also places strict limits on foreign
ownership of businesses, a policy that
squelches competition domestically.
Having once overtaken China as the
world’s fastest-growing major economy,
with consistent growth of 8 percent, India
has seen its GDP growth fall to its lowest
rate in the last eleven years. Starting in the
early 2010s, massive red tape and corrup-
tion began to weigh on production, bring-
ing growth rates down to 5 percent. Modi
ran on a platform of “minimum govern-
ment, maximum governance,” promising
to liberalize the economy. His government
has introduced some encouraging reforms:
reducing barriers to foreign investment,
cutting subsidies, and unifying India’s
states into a common market. In a country
still suffering from a half century of social-
ism, these measures—though limited—are
not inconsequential.
Yet by mimicking Beijing’s protectionist
trade policies, Modi’s government evinces
a lack of commitment to earnest economic
liberalization. This is not surprising, as
Modi’s brand of populism, much like
Trump’s, is committed to strengthen ing
domestic manufacturing, protecting small
businesses, and promoting domestic agri-
culture. A greater hazard is his religious
nationalism, which has ignited social strife3col_QXP-1127940387.qxp 3/4/2020 1:34 AM Page 20
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