Selling India to Trump won’t work

Rajkamal Rao | Updated on January 27, 2018

Let’s go To make in America and bring profits home   -  Mohammed Yousuf

Indian businesses must dream big and set up shop in Trumpland to tap the nationalist sentiment. That’s a win-win

In the wake of a new president assuming power in Washington, India is doing what it has been for decades. Play up why a partnership with India is beneficial to America, as a backdrop to negotiating treatment favourable to India in trade and visa policy.

A commerce ministry official recently told BusinessLine: “It is important for us to first establish the relevance of Indian companies for the US economy before we make a case for easier visa rules and other industry-friendly dispensations. We plan to do so with facts and numbers when we meet the new US team of officials”.

The trouble with this approach is that it simply won’t work with the new Trump administration.

Steady slogans

Trump became the 45th US President against all odds, against the predictions of every pollster, pundit or foreign leader, and against the mighty US media complex unabashedly supporting the Clinton machine — for one simple reason. He was remarkably consistent during the campaign — indeed, over nearly 30 years — about three core themes. And he never wavered despite pressure from everyone in the establishment.

First, he said that America is being taken for a ride by foreign countries: China and Japan were stealing America’s jobs because of outsourcing, product dumping and currency manipulation. The rich countries (NATO, the oil economies, Asian nations) were not paying their fair share to help America protect them.

Second, he said that America had forgotten how to defend itself: Mexico was exploiting the weak southern border by sending illegal immigrants over resulting in increased crime on American streets, higher drug use in the Northeast and most importantly, humiliation because millions of Americans were losing their jobs to cheap immigrant labour.

Third, he said that the cause of America’s ills is the stupidity of America’s leaders: America has struck too many bad deals — with companies, industries, nation-states — costing the US government money and millions of Americans their jobs, prosperity and pride.

Give and take

Speaking to the world after taking oath, Trump bluntly disregarded the mighty seated around him — the very people he holds responsible for “America’s Carnage”. “The oath of office I take today is an oath of allegiance to all Americans. From this moment on, it’s going to be America First. Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families.”

If this vision is enacted, it would mark a deeply profound shift of what the global economy means. Trump is an avowed nationalist and he encourages other countries to be so too. “We will follow two simple rules: Buy American and Hire American. We will seek friendship and goodwill with the nations of the world — but we do so with the understanding that it is the right of all nations to put their own interests first.”

Globalisation has always been about give and take. Trump’s point is that over the last many decades, America has given too much and taken too little. There is some truth to this view because, according to the US Census Bureau, the US has run a total trade deficit for the last 45 years straight — from $1.3 billion in 1971 to over $500 billion in 2015.

To be sure, America runs a huge surplus in services but this pales in comparison to its larger deficit in goods. Trump contends that this is the reason for America’s decline. “For many decades, we’ve enriched foreign industry at the expense of American industry; we’ve made other countries rich while the wealth, strength, and confidence of our country has disappeared over the horizon.”

What should India do?

The first thing is to realise that to Trump, the currency that matters most is American jobs and American pride. India should borrow ideas from the large industrial houses of Japan, Germany and South Korea which have set up massive plants and feeder factories in the US. To Trump, an American job is an American job and the ownership of the company is less important.

There are already clues that such foreign investment will be warmly welcomed by the new administration. SoftBank CEO Masayoshi Son pledged to invest $50 billion in the U.S. and create 50,000 new jobs. Alibaba’s CEO Jack Ma met Trump recently and promised one million new jobs. Trump - who held Japan and China in much disdain through the campaign — tweeted out happily, celebrating these announcements.

India’s IT industry should likewise begin to make large investments in the US, setting up delivery centers, hiring and training American employees. This, of course, is counter-intuitive to the global delivery model of providing low cost services from India-based centers.

But India’s IT industry can adapt by establishing so-called near-shore delivery centres in less-expensive States, such as the South, and Midwest States such as Ohio, Michigan and Wisconsin which propelled Trump to victory. To Trump — and the thousands of US companies which will attempt to curry favour with the new administration — lowering IT costs through labour arbitrage is secondary to creating American jobs, even if corporate IT expenses rise and profits fall. In the 1990s, sceptics thought Japan’s automotive industry would collapse if it set up plants in the US. But today, Toyota is the third largest US auto maker, with a market share neck to neck with the mighty Ford. Nasscom too should think big and aim to dislodge the IBMs, Microsofts and Accentures of the US, just like Toyota and Honda did to GM, Ford and Chrysler. It’s a strategy where Infosys, Wipro and TCS can serve the world from the US, rather than the other way around, and take huge profits home to India.

In such a scenario, the question of negotiating over visas becomes irrelevant. Better, it plays well with Trump’s ideals, building up political capital that India can use for other important matters such as geopolitical stability and security. Israel and Russia are already in Trump’s good books; India too could then join this exclusive club.

The writer is the managing director of Rao Advisors LLC, Texas

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Published on January 25, 2017
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