US-India Trade Deal: A Colonial Era-Like Unequal Treaty
The Indo-US Trade Agreement, even leaving aside specific provisions, has two unusual features that mark it out as an Unequal Treaty, of the sort that imperial powers used to impose on countries of the Global South that they did not directly rule.
The first is the stipulation that, leaving aside commodities excluded altogether from the purview of the agreement, while the US would impose 18% import duty on Indian goods, India would impose, according to US President Donald Trump’s rough description, zero import duty on American goods.
To have an agreement that officially institutionalises such a difference in tariff rates is most bizarre. It amounts to the US adopting a “beggar-thy-neighbour” policy where the “neighbour” who is being reduced to the status of a “beggar” actually signs an agreement consenting to being reduced to such a status.
The second unusual feature is the stipulation that India must buy at least $100 billion of American goods every year for the next five years. A Trade Agreement providing the minimum amount of goods that one country must buy from another, come what may, flies in the face of the entire free market ideology so beloved of the bourgeoisie.
The actual amounts traded, according to this ideology, must depend upon the choices of the buyers; they cannot be dictated by governments and hence cannot be decisions of governments. To have this amount incorporated in an Agreement is, therefore, utterly bizarre; even more bizarre is the fact that this minimum amount is stipulated for only one country that is a party to the agreement but not the other, which clearly amounts, therefore, to an Unequal Treaty.
Such an Unequal Treaty can only be imposed by one country upon another. The Bharatiya Janata Party-led government, no matter what it pretends, has been arm-twisted by the US into signing this Agreement. This then becomes the first time in the history of post-independence India that the government of our free country has behaved in so craven a manner as to sign an Unequal Treaty that is reminiscent of colonial times.
The two most obvious implications of this Unequal Treaty are, first, with regard to the purchase of Russian oil, and second, with regard to the agricultural sector. The question that immediately arises is: how does the BJP-led government ensure that imports from the US are raised from around $40 billion now, to at least $100 billion in the coming year?
The government cannot obviously be hoping that imports of all kinds of goods and services from the US would suddenly more than double in just a few months, even if tariffs are reduced to zero; it must therefore be banking on a reduction in Russian oil imports and its substitution by American oil, for that is something it can actually bring about. This not only amounts to acceding to what the Americans have been demanding for some time, but would raise our oil import bill and give a push to inflationary pressures. This is because American oil is at least about 20% more expensive than Russian oil.
On average, about one-third of India’s total oil imports comes from Russia; this, of course, was before the government started cutting down on such imports in recent months, but such cutting down itself was a prelude to the Trade Agreement, so that its effect should be counted not separately but along with that of the Trade Agreement.
Now, taking our total oil imports to be around $120 billion, the switch from Russian to American oil, would thus add about $8 billion to our oil import bill. This is just one element of the colonial-style “drain” that the US is imposing on India through the new Trade Agreement.
This “drain” would not be coming out of the pockets of Indian oil companies; they would just “pass it on” to the buyers through higher prices of downstream goods. This means an inflationary push to the economy whose real victims would be the working people since they do not have their money incomes indexed to prices. The shift from Russian to American oil, therefore, is not just a matter of international diplomacy; it is also a very important class question.
As regards the agricultural sector, the government claims that since some important grains, such as rice and wheat, have been kept out of the purview of the Agreement, agriculture will not suffer because of it. But very significant segments of the sector itself or downstream activities, have been opened up, as the Commerce Minister himself has admitted, though not publicly. Notable instances are apple, cotton, tree nuts, fresh and processed fruit, soybean oil, and wine and spirits. Besides, animal feeds like DDGs and red sorghum have been opened up, which would place American companies in a virtual monopoly position in the Indian market. States such as Jammu and Kashmir, Himachal Pradesh, Maharashtra and Gujarat will be particularly adversely affected.
It would no doubt be argued that there is a shortage of animal feed in the country and that larger imports would be beneficial; but acquiring requisite imports to overcome shortage is very different from opening up the entire market for such imports at zero tariffs.
Likewise, the Commerce Minister’s claim that dairy products are left out of this particular Agreement, is of little consolation in view of the fact that they figure in the Free Trade Agreements signed recently with the European Union, New Zealand, and the United Kingdom.
In fact, it is noteworthy that the Trump Administration is talking about the incomes of American farmers rising by billions of dollars because of this Agreement, even as the Indian government is denying any adverse consequences for Indian agriculture. If American farmers are going to obtain a larger market in India, then it necessarily follows that Indian farmers must be getting squeezed out of the market. The only exception can be the case of fresh-credit-financed purchase of some agricultural products used as inputs like animal feed, but these can only be a fraction of the total increase in American farm exports to India in consequence of this Agreement.
Here again, we have an echo of the colonial era. The peasants and agricultural labourers then had been the worst victims of colonial encroachment into the economy, which is why the one slogan above all, inscribed on the banner of the anti-colonial struggle, had been that they would never have to face such a fate in independent India. Exactly the same hardship, however, is being visited upon them once again in complete betrayal of the promise of the freedom struggle, and, not surprisingly, by a government led by a party that had nothing whatsoever to do with the freedom struggle.
Critical commentaries on the Indo-US Trade Agreement tend typically to put the blame for it exclusively on the Narendra Modi government; but this is superficial. Governments, including fascistic ones, act in the interests of particular classes; and it is significant that the news of the Agreement being finalised had enthused the Indian stock market greatly.
The Indian big bourgeoisie and the upper segment of the salariat and professionals want such a tying up with the US even at the expense of the working people of the country.
The Indian big bourgeoisie’s quest to go global gets a fillip with the availability of the American market, albeit with 18% tariffs. Likewise, the upper salariat and professionals’ desire to have their children settled in the US, which had received a setback because of Trump’s animosity, can now have a greater chance of fulfilment.
The fracturing of the anti-colonial class alliance, with the big bourgeoisie and the upper segment of the salariat and professionals willing to sacrifice the interests of the working people to further their own interests, is what underlies this capitulation to imperialism.
This fracturing, however, began even before the BJP-led government came on the scene. In fact, the adoption of the neo-liberal strategy itself was an expression of this fracturing. Here, as in other economic matters, in other words, the government led by the fascistic forces carries forward with a ruthless disregard for the working people, a tendency started earlier with the adoption of neo-liberalism.
The Modi government’s capitulation before US imperialism stands in sharp contrast to the attitude of an earlier Prime Minister, albeit presiding over a bourgeois-led regime, whose rejection of American pressure had been so resolute that an American President had confessed to being afraid of looking her in the eye. The difference between the two situations lies in the fact that she had been the Prime Minister of a dirigiste economic regime, which had emerged from the anti-colonial struggle, and, notwithstanding the bourgeois development it was ushering in, had not been oblivious of the interests of the working people.
Prabhat Patnaik is Professor Emeritus, Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. The views are personal.
