Opportunities and challenges for Sri Lanka with the Indo-American trade split?
Nehru had invested heavily in newly independent India’s relations with People’s Republic of China, which New Delhi was among the first to recognise. Comradery with China was not just a pillar of his policy of non-alignment.
It was part of Nehru’s civilisational outlook, which defined what India would become: A secular multiparty democracy, with a strong judiciary, and a military firmly under civilian political control. Also, India became a byword for the Licence Raj of quasi socialism.
Hindi-Chini bhai bhai (India and China are brothers) was the catchphrase of Nehru’s China relations. So much so that even when relations were strained along their disputed border, Nehru never suspected China would attack.
Then, when the Chinese fought a brief but bitter border war and routed the Indian army in 1962, Nehru suffered a reality check. Nehru, being Nehru, survived in his office, but he nursed a huge sense of betrayal until his death. Barely one and a half years later, he died heartbroken.
Leave aside that last part; much of the same could now be said about the incumbent. Narendra Modi was wowed by Donald Trump, who hosted him during his first term in a mega Texas rally, aptly titled ‘Howdy Modi.’
When Trump on his second term tossed the wrecking ball of trade tariff against America’s (mainly) friends and foes, most thought that Trump would not be foolish to against India rather he would create new opportunities for India to become the next global manufacturing hub, thanks to global firms exiting and diversifying from China due to Trump’s trade war. But in a single act of foolishness and an act generally reserved for hostile states — Trump committed harakiri.
He slapped a 25% tax on Indian goods, and went on to offend India for its purchase of Russian oil, on top of an earlier 25% Trump tariff which was proving to be futile, making Indian exports to America among the most heavily taxed and effectively pricing them out of competition.
The Elephant was given two choices by a barking dog : stab Russia and become a poodle to the “ Hound “.
Modi instead did what an Elephant was expected to do – ignore the barking dog. India refused the American dictates and in fact increased the purchase of Russian oil. Russia is a time tested Strategic friend. After all how can India forget that wretched Nixon’s act in 1971 ?
Trump wanted PM Modi to double Cross Putin but intriguingly — all the while Mr. Trump himself is sycophantically cozying up to Putin. India has a broader policy of non-alignment, now repurposed as multi-alignment, and India’s perennial emphasis on strategic autonomy. After all now India is one of the four poles in the new World Order. Russia, China and USA are the other three.
Treading nonchalantly as an elephant, dogs will keep barking
Modi had trodden softly: While India has stopped short of outright retaliation thereby keeping room for negotiation. He has instead moved to expedite the ongoing mending of fences with the neighboring China. He attended the just-concluded Shanghai Cooperation Organisation summit in Tianjin, marking his first visit to China in seven years.
The earlier hopes of a growing thaw between New Delhi and China after Modi’s visit to Wuhan in 2018 were dashed with the LAC Clashes between Chinese and Indian forces in the glaciers of Galwan two years later. Since then the two sides have moved on to de-escalatory measures with protocols of engagement between the armies of two sides on the disputed LAC.
The recent thaw began after Modi met with Chinese President Xi Jinping on the sidelines of the BRICS summit in Kazan, Russia, in October last year, well before the Trump tariffs.
However, Mr. Trump has surely added incentives for the two sides to repair their relations. Modi had skipped the previous summit in Kazakhstan last year. In the just-concluded summit, Xi Jinping invoked an old slogan: “for the dragon and elephant to dance together.”
“It is the right choice for both sides to be friends who have good neighbourly and amicable ties, partners who enable each other’s success,” Xi said.
Modi said India was “committed” to taking their countries’ relations forward “on the basis of mutual trust and respect,” and referenced their bettering of ties, including an easing of tensions along their disputed Himalayan LAC – where the two fought a deadly skirmish in 2020.
“The interests of 2.8 billion people in both our countries are tied to our cooperation,” he added.
The very idea of two neighbouring great powers – each with contrasting political systems and historical claims to greatness — in cooperating, rather than balancing — against each other, leaves much of contemporary understanding of great power politics on its head. Therefore, the growing Indo-China thaw leaves much to be seen in the years to come.
However, Mr. Trump, who had himself taken credit for solving many global conflicts, could take credit for pushing India and China together, and effectively, scoring a self goal, and potentially setting off the undoing of America’s Indo-Pacific strategy. His cozying up to Pakistan’s army chief and de facto leader, Asim Munir, might alone make India spit over America’s credibility as a reliable ally.
What we are witnessing may be a short-term major geoeconomic turmoil for a declining USA – or if it persists, a major geopolitical reconfiguration in Asia, the Indian Ocean and the Indo Pacific in the decades to come.
In the immediate term, Sri Lanka could tap into Indian firms (electronics, gems and jewelry, and pharmaceuticals), diversifying out of India to escape Trump’s tariffs. That offers Sri Lanka an opportunity to diversify its export basket, create employment, and cultivate trade and industrial nexus with the world’s fastest-growing large economy.
However, Sri Lanka has a limited window; it’s unlikely that the US-India trade split will last, at best it will be till the Trump administration. The government should act fast and present Sri Lanka as a favourable second hub for Indian businesses, not just ones selling to America, but for the broader Indian industries and its world-beating tech firms.
Sri Lanka should do so with extreme care, without being seen as undercutting India at its time of duress. Nonetheless, this is a monumental geoeconomic opportunity that Sri Lanka should not miss. The government should set up a dedicated mechanism to make it easier for Indian businesses to move in and set up shop, and should actively lure them.
Secondly, if the foolish Trump tariff on India persists, it would decouple Indian economy from America. With economic decoupling, it is unlikely for a strategic alignment to last long. One might wonder how India detached from the United States, would behave.
The most extreme example would be India in the 1970s and 1980s, which loathed the presence of external powers in the region, particularly in its de facto sphere of influence in particular in South Asia and the Indian Ocean region.
In the early 1980s, J.R. Jayewardene burned his fingers and burned the country by trying to be too cocky with Indira Gandhi’s India. India’s broader strategic policy is aptly named ‘Indira Doctrine.’
With inputs from Daily Mirror
