G Parthasarathy

A world of tweets, trade and turmoil

| Updated on July 25, 2019 Published on July 24, 2019

The US’ hold on global business and the domination of the dollar can be countered by boosting other currencies

Governments across the world, and most notably the United States, use instruments of state power — like military pressures, diplomatic isolation, travel bans and economic sanctions — as instruments of persuasion and coercion. President Donald Trump has, however, devised a new instrument of state coercion to express his displeasure and announce his proposed actions. This 21st Century diplomatic innovation by President Trump is his ‘Twitter handle’.

Twitter was initially Trump’s mode of communication in domestic politics, during his bitterly fought presidential election campaign against Hillary Clinton. It has now become his favourite instrument to chastise America’s foes and friends alike, ranging from China and Iran to neighbours like Canada and Mexico, apart from allies like the European Union and partners like India.

American friends, however, aver that Trump uses this unique method of addressing foreign rulers primarily to cheer up his domestic base, apart from informing the world of his late night thoughts.

Criticising allies

Trump has excelled himself before, when he took on an exceptional target — his country’s most loyal ally — the United Kingdom of Great Britain and Northern Ireland. He poured scorn on and ridiculed the serving British Ambassador in Washington, Kim Darroch, who doubtless regards himself as the prima donna of Washington’s Diplomatic Corps. Trump also hit out at Theresa May for allegedly mishandling the Brexit negotiations to fashion a “soft exit” of Britain from the European Union. Trump’s epithets included a description of Darroch as Britain’s “wacky Ambassador”, a “very stupid guy” and a “stupid fool”. Theresa May received her share of Trump abuses for her “failed Brexit negotiation”. He described May’s diplomacy as “badly handled” and accused her of going “her own foolish way”, while leading her country into in a “disaster”.

True to form, Trump’s tweet ended with inevitable boasting about American military and economic might. All this followed leaks of confidential reports Ambassador Darroch had sent to Whitehall, which were highly uncomplimentary about Trump’s qualities of head and heart.

Only two countries — Israel and Saudi Arabia — appear to be free from any ‘Trump Tirades and Tantrums’. Many in Washington aver that this arises from the closeness of the Saudi and Israeli leadership to Jared Kushner, Trump’s son-in-law. Kushner was recently in Bahrain, trying to sell his solution for Middle East Peace to Arab leaders. The Kushner ‘solution’ required the Palestinians to renounce all claims to Jerusalem and the West Bank, in return for petro-dollars from oil rich Arab countries. Kushner’s proposals were received coldly in Bahrain, with even American ally Saudi Arabia making it clear that its approach to the Palestinian issue was distinctly different.

Sanctions and measures

Trump’s approach to crucial contemporary issues enjoys little international support. Even America’s NATO allies differ with him on important issues like climate change and sanctions on Iran.

Trump’s desire to target India on trade issues became evident when Indian steel and aluminium products were hit with import duties of 25 per cent and 10 per cent, respectively, in March 2018. India’s $761-million exports of steel to the US have fallen by 46 per cent since then.

Trump also abolished the preferential duties that India was getting as a developing country. His tariff increases substantially hit India’s exports of mechanical and electrical machinery, chemicals, steel, and auto parts. India retaliated in a measured manner just over a month ago, targeting industries and agricultural products produced by Trump’s political/electoral supporters. They included new tariffs on imports ranging from almonds and walnuts to steel products.

The two sides decided to resolve these differences bilaterally, following the Modi-Trump Summit in Osaka. Preliminary talks have been held recently in New Delhi, with a visiting American delegation. India should however, bear in mind that it is not the US alone that is unhappy with what it sees as growing Indian protectionist measures.

Trade conflict

The problems India faces from Trump’s protectionist policies pale in comparison to the impact of enhanced American duties on China’s exports. India’s annual exports to US amount to around $54.3 billion, while China’s amount to $539.67 billion annually. Moreover, recent restrictions imposed by the Trump administration severely curb China’s easy access to American hi-tech products. The impact of these curbs is being increasingly felt by China, whose remarkable industrial and technological transformation has been largely facilitated by easy access to American technology.

Resolving these issues is going to be more difficult than dealing with the protectionist restrictions that India faces now. While India’s exports to China have shown signs of rising, New Delhi has to devise strategies on how it could best utilise Chinese 5G networks and also encourage Chinese investments in its industrial sector. This has to be undertaken while ensuring simultaneously that its national security is not compromised.

Strengthening world finance

India, is, however, going to face other challenges, which are the creation of the US Congress and not the Trump administration. The most important of these are the prospects of American sanctions flowing from India’s acquisitions of Russian weapons.

India has taken on this challenge frontally and has let it be widely known that it has no intention of buckling under US pressures as it goes about acquiring/producing Russian weapons platforms and systems, ranging from AK-203 Automatic Rifles to S-400 Surface to Air Missiles, naval frigates and submarines.

Banking and financial measures to bypass US sanctions were discussed during President Putin’s visit to India. They have since been put in place. While the US has threatened Turkey with sanctions for acquiring S-400 missile systems by ending the proposed supply of F-35 fifth generation fighters, India has wisely stayed away from attempting to acquire such equipment from the US.

The American Indo-Pacific strategy is premised on support from countries like Japan, South Korea, Vietnam, Indonesia and India — a strategy which would have little relevance without the participation of a friendly India.

The Americans use the domination of the US dollar in international finance as their prime instrument to coerce others, by resorting to threats of financial and banking sanctions without securing international approval. The time has perhaps come to counter this coercive use of American power, by increasing use of the euro and the Chinese renminbi for global financial transactions.

The European Union countries are not too happy at being tied up by unilateral American sanctions on Iran, despite Iran abiding by all the provisions of an agreement the EU signed, together with Russia, China and the Obama administration.

The writer is a former High Commissioner to Pakistan

Published on July 24, 2019
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