Explained: Six Issues That Will Come Up For Discussion Between India And US During Pompeo’s Visit

When US Secretary of State Michael Pompeo said ‘Modi hai to mumkin hai’ at the India Ideas Summit earlier this month, he was not just repeating a popular slogan, but was also driving home a message: With a historic mandate, Prime Minister Narendra Modi is in a position to make deals on thorny issues between India and the US, most importantly those needing concessions from New Delhi.

Late on Tuesday, he arrived in India to lay the ground work for talks on some of these issues, ahead of a meeting between Modi and President Donald Trump on the sidelines of the G-20 Summit, which will be held in Japan's Osaka this week.

Here are six issues which will come up for discussions during his visit:

1. Trade And Tariffs

Even as the convergence between the US and India on issues of security, and more specifically, on managing China’s rise, has increased, the differences on trade have only grown. In fact, under the Trump administration, US’ appetite to digest some trade barriers has decreased, thanks to the ‘America first’ policy.

In the latest round of tensions, India has imposed tariffs on 28 items exported by the US in reaction to Washington withdrawing the Generalised System of Preferences (GSP) for India that allowed duty-free export of over 3,000 products from the country. These tariffs were first proposed in response to the US’ move to impose heavy duties on steel and aluminium imports. Imposition of tariffs of more than $200 million on import of US goods worth $1.4 billion was delayed by the Modi government multiple timed since they were first announced on 20 June 2018.

But this is just the latest. Strain in trade ties between the two countries runs deeper. For example, the two sides have divergent issues on many critical issues at the World Trade Organisation, and even on the dispute resolution mechanism at the body. Many of these issues, such as the dispute over intellectual property rights, have been presented for years, but Trump’s policies have aggravated these.

Given his push for reducing trade deficits, Trump does not appear ready to give India any concessions, even as it pushes New Delhi to not import oil from Iran and weapons from Russia. In fact, signalling his intent, US Trade Representative, Robert Lighthizer, said last week that the US “looking at a variety of other unfair actions (by India) that may provoke us to take some other kinds of, some additional action”. Repeating an allegation that Trump often makes, his hawkish trade representative also said that India has the “highest tariffs of any country you can imagine”.

2. US’ Opposition To Data Localisation

In 2018, based on the recommendations of the Justice Srikrishna Committee, the Reserve Bank of India made it mandatory for fintech firms to store payments data of Indian citizens within the country. It is not only applicable on card payment services such as Visa and MasterCard but also on companies such as WhatsApp and Google, which offer electronic or digital payment services in the country.

India has been pushing for data localisation because the availability of data within the borders of the country gives the government and regulators the jurisdiction to call for it when required. This will be beneficial for law enforcement agencies in particular. If it is stored outside India, access to this data will be restricted by local laws and Indian agencies will be dependent on the whims and fancies of the host country. Moreover, in the wrong hands, this data can become a tool for mass surveillance. Additionally, data localisation could also create domestic jobs and skills in data storage and analytics.

Although the US has denied it, reports suggest that the Trump administration is planning to cap H-1B visas issued each year to Indians at between 10 to 15 per cent of the annual quota to deter India from enforcing data localisation rules. The H-1B visa programme allows companies to bring skilled workers from other countries into the US, and, hence, is a source of jobs for thousands of Indians. Around 85,000 H-1B visas are granted each year, and Indians receive around 70 per cent of these.

Just after the RBI announced its move on data localisation, the US had called the policy a ‘significant barrier to digital trade’. And it had done so in support of US-based firms that are operating in India. Washington wants India to eliminate trade barriers for American companies to cut the cost of doing business in India.

US-based companies are unwilling to comply as it would require them to spend money on infrastructure in the form of servers and buildings, and, of course, on employing local professionals to manage it. This will add to their operating costs. By some accounts, costs may go up by 10 to 50 per cent for some players.

By signalling that it is mulling caps on H-1B visas, the US is effectively forcing Indian firms, the largest beneficiaries of the H-1B visas, to lobby against data localisation policy. As losing H-1B visas would force them to hire onsite, which will impact their margins, Indian firms will be more inclined than ever to lobby against the policy.

3. S-400 Deal With Russia

To counter Moscow, the US has been discouraging countries from buying weapons from Russia using the threat of sanctions under its ‘Countering America's Adversaries Through Sanctions Act’ put in place in 2017. It has used the same tactic with India over the last one year to deter New Delhi from buying S-400 air defence system. Trump, who has the authorisation to give India a waiver for the deal, has not done so yet.

India has opposed this move, arguing that it is the largest buyer of Russian weaponry and can’t cut defence ties with Moscow as a large part of its in-service equipment, from fighter jets, to tanks and submarines, is of Soviet or Russian origin. New Delhi has also pointed out that it has been diversifying its arms purchases in recent years, turning to the US for equipment worth $20 billion in the last two decades. However, these arguments have fallen on deaf ears till now.

At the same time, there appears to be little appetite in India to digest such restrictions on its security ties with Russia. India had signed a nearly $6 billion deal with Russia for the S-400 systems last year, ignoring US warnings against it.

4. China, Huawei And 5G Trials

Routine discussions on China will also be part of the talks between Pompeo and his counterpart, Foreign Minister S Jaishankar. Apart from the Indo-Pacific strategy, over which India and the US have no major disagreements, on the table would be Huawei’s involvement in India’s 5G trials. The US has banned the company, citing security concerns arising from its close connections with the Communist Party and the People’s Liberation Army. The US has also been discouraging its partners to involve Chinese companies in the development of their 5G infrastructure.

Australia and New Zealand have taken US’ advice, but India has not taken a decision yet. New Delhi believes that a decision against Huawei will become another sore point in its already fragile relations with Beijing. Huawei has offered to sign a “no backdoor” agreement with India to allay its security concerns.

Given that 5G trials are likely to begin in the next three to four months, India will have to take a decision on the issue very soon. Recently, UK’s leaked proposal to adopt Huawei technology for 5G network had triggered a response from the US, which had said that any such move by London or any other partner would force the US “to reassess the ability for us to share information and be interconnected”– suggesting in complex words that intelligence-sharing arrangements could be at risk.

5. Pakistan And Afghanistan

India’s strained relations with Pakistan and the US’ effort to negotiate a resolution with the Rawalpindi-backed Taliban in Afghanistan will also be under discussion. On his way to New Delhi, Pompeo made an a surprise stop in Kabul and is likely to update India on the progress made in the negotiations with the Taliban.

India has not been in favour of talks with the Taliban given its proximity to Pakistan’s Inter-Services Intelligence but has not openly discouraged ongoing negotiations. US special envoy for Afghanistan reconciliation, Zalmay Khalilzad, had visited India in May to brief India on the talks in Doha. Interestingly, Khalilzad had skipped India on his two previous two multi-nation tours related to the Afghanistan issue.

6. Iran

The security situation in the Middle East and the deteriorating relations between the US and Iran are also likely to be discussed. Although India has cut down oil imports from Iran, most of India’s energy supplies continue to come from the Persian Gulf, where the conflict between Tehran and Washington will unfold if the situation worsens. Some oil tankers in the region have already been attacked and damaged, and Iran recently shot down a US drone, pushing US close to the brink.

The Indian Navy has deployed Kolkata-class stealth guided-missile destroyer INS Chennai and Saryu-class offshore patrol vessel INS Sunayna in the region to re-assure Indian-flagged commercial vessels transiting those waters.