The recent trip of the US Secretary of Commerce, Gina Raimondo, to New Delhi shows the close relationship between the strategic and commercial interests of the US and India. Secretary Raimondo began her visit by meeting with the Minister of Foreign Affairs Saint Jaishankar and National Security Adviser Ajit Doval and closed by meeting with Prime Minister Narendra Modi. In the middle, Raimondo and the Minister of Commerce and Industry, Piyush Goyal. summoned a long overdue meeting of the US-India Trade Dialogue. But even that meeting focused on a product of vital strategic importance to the US and India in their competition with China: semiconductors.
Traditional business issues were largely ignored or left to a forum of private sector CEOs.
The main theme of Raimondo’s interactions with Jaishankar, Doval and Modi was the Strategic Business Dialogue. The parameters of this so-called “new” dialog are unclear, and it’s actually not new at all. Rather, it follows a long history of attempts to address Indian complaints that India is being denied access to the most advanced US defense-related technologies. The most recent “new” attempt to address this issue was he initiative on Critical and Emerging Technologies (iCET) announced by President Biden and Prime Minister Modi in May 2022.
However, addressing this perceived discrimination against India has a long history dating back to the Defense Technology and Trade Initiativehe Next steps in the strategic partnershipand various US administrations.
What is “new” about this Strategic Trade Dialogue is that it will be led by the Foreign Secretary of the Indian Ministry of External Affairs and the Under Secretary of the US Department of Commerce Bureau of Industry and Security. This is a different and more relevant bureaucratic configuration for such discussions. However, since the issues go to the very heart of the US-India strategic and economic relationship, it is doubtful that the resolution of export control issues will occur without the direct involvement of the highest US officials. USA and India. This, in turn, will depend on continued strategic trust-building between the US and India not only on defense against China, but also on the thorny issues of Russia and nuclear and missile technologies.
Raymond and Goyal signed a US-India Memorandum of Understanding on Semiconductor Supply Chain and Innovation, and was also a topic of contention between Raimondo and Modi. Although the text of this MOU was not immediately made publicly available, it appears to be an attempt to resolve the conflicting business and strategic objectives of the two countries regarding semiconductors.
Both the US and India are embarking on nationalist stimulus programs for chip manufacturing within their own borders. America has its CHIPS and Science Act under which the White House boasts that the government will directly invest more than $52 billion and the private sector will invest another $150 billion. India has its Indian Semiconductor Mission (ISM) with an announced outlay of the rupee equivalent of around $9 billion and a wide range of tax incentives.
At first glance, these US and Indian subsidy schemes are competitive, and the size of the US incentives is likely to outweigh India’s efforts. On the other hand, both the US and India have a vested interest in seeing foreign direct investment in the China-based semiconductor industry move out of China to friendlier precincts, presumably India.
The Semiconductor Supply Chain and Innovation Partnership MOU could provide a mechanism to limit competition between the US and Indian semiconductor incentive programs while accommodating the movement of semiconductor investments from China to India. This is a difficult task indeed. The theory behind the MOU seems to be that this can be done by slicing up the chip design and production process so that the US and India focus on different parts of the process, thus making the US semiconductor industries look like they can. The US and India are complementary rather than competitive. Given the two countries’ historical inability to resolve basic trade disputes at the government level, this degree of government-to-government cooperation in intervention seems unlikely at best.
The good news is that the US and Indian private business sectors seem to have the capacity to solve tough business challenges. As noted in the Joint Statement of the Trade Dialogue, “bilateral trade in goods and services has nearly doubled since 2014, surpassing $191 billion by 2022.” The United States regained its position as India’s largest trading partner in 2022, and India is now the eighth largest trading partner of the United States. Of course, these data pale in comparison to US-China trade of $690 billion in goods alone and China’s position as America’s largest trading partner.
The US-India CEO Forum met at the same time as the Business Dialogue, but governments seemed to pay little attention to the essential need to incorporate the benefits of public-private partnership to solve difficult business problems. The Joint Statement simply noted that Raimondo and Goyal “shared their strategic priorities for the bilateral relationship with the members of the CEO Forum” and “both governments are working to examine the CEO’s recommendations for appropriate action…”. Similarly, the issue of adding India to the trade pillar of the Biden Administration’s flagship economic cooperation initiative, the Indo-Pacific Economic Framework for Prosperity (IPEF), was conveniently swept under the rug. When asked about the issue at the press conference, Raimondo said simply: “That didn’t come up in the discussions today.”
In short, the fact that the US-India Business Dialogue and CEO Forum took place is encouraging. This is now the third year of the Biden Administration. For 2023 to have passed without meetings would have been detrimental. Commerce Secretary Raimondo’s many high-level interactions show how US and Indian trade and strategic relationships are intertwined. In fact, strategic and trade issues are part of the same US-India reality and should be treated as such. The Raimondo meetings also demonstrate the high level of goodwill and importance both sides attach to the US-India relationship. The strategic/business issues challenging the relationship indicate the need to continue building the trust that will make the US-India partnership as strong as it should be.