Opinion Pratap Bhanu Mehta writes: India must stand up to Donald Trump, the bully

Often, globalisation can produce some domestic reform. China’s accession to the WTO facilitated some of that. But it should be borne in mind that when China joined the WTO, it was joining a system of world trade with laws, institutions, and adjudicatory processes. The world trading order was, in some respects, unequal, and countries like India stood their ground on issues important to them. But it was a system with relatively predictable channels of negotiation.

Trump’s trade proposals are fundamentally not about a minimally rules-based and predictable trading system. When Trump says he is aiming at reciprocal tariffs, it might sound like that, but it is anything but. Laws or rules, by their very nature, are enabling or constraining devices. They do not dictate outcomes. Countries might run trade surpluses with some and deficits with others; these change over time. Trump’s tariffs are not about tariff reciprocity; they are about balancing trade on a bilateral basis, which is an absurd idea. Even if you end up with reciprocal tariffs, Trump will up the ante on volumes on balancing and so forth, as the tariffs imposed on Israel, America’s closest ally, suggest. It would be foolish to assume that once you have negotiated tariff levels with the US that will be the end of the matter. Instead, what you are opening yourself up to is endless haggling and uncertainty.

Trump’s moves remind us of the worst aspects of India’s own political economy, where different sectors, products and even individual firms had to constantly lobby with the government to lower or raise tariffs. In other words, tariffs were an instrument of domestic patronage. That is exactly how Trump will use them. Chips, for example, are exempt for national security reasons. But does anyone have any idea which goods, products or services in the future will not fall under the discretionary power of the American president? Domestically, he is signalling that tariffs are about patronage. To make it worse, he is also signalling that they are potentially about revenue, a possible substitute for taxes. If a government thinks a tariff policy is about revenue, what are its implications for the political economy?

Third, trade and finance rules are embedded in larger structures of credibility. The reason the US could exercise the exorbitant dollar privilege was in part because of its credible and open political system. China, despite its immense power, struggles to signal credibility on currency because of its institutional deficits. Trump’s entire agenda is to make American law more uncertain, the functioning of its institutions, including possibly the Federal Reserve, more capricious and amenable to its mercantilist whims. It is using state power to upend the global financial system by backing cryptocurrency. Trump’s play on tariffs must be seen in the context of the larger wrecking ball he has thrown at the world system; it is not just a technical economic issue. The complete collapse of the credibility of the American state that Trump exemplifies ought to be taken seriously. It is felt even by its closest allies.

American foreign policy always had an imperial element, often driven by a desire to control natural resources. Power is used to open markets and access resources. But that imperial policy was checked by at least a modicum of commitment to interdependence, an ideological commitment to the idea that there cannot be a global trading system that is a zero sum-game system. Trump rejects that meta idea; trade is now entirely about American primacy.

Then there is this consideration. There was great asymmetry in the globalisation of capital and the globalisation of labour. But Indians were an immense beneficiary of labour mobility, especially in the US. Immigration is a complicated issue. Societies can regulate it. But Trump wants a closed and possibly cruel world. Ingratiating him on trade is not going to give you a fairer globalisation.

India’s sclerotic development has left us with little leverage. But the lesson we should draw from this is: There must be a renewed national commitment to development on all fronts. We must not peddle the illusion that tariff concessions under conditions of being bullied are a path to development. Our push to ingratiate ourselves with Trump is not being driven by sober long-term thinking, but by the view that getting on the right side of Trump is what will count as a strategic triumph.

Trump is engaging in price discovery. Some have suggested that those who respond favourably to Trump early will receive better deals. But none of these deals will be dependable. Our long-term interest lies in a strong signal that India is not a pushover, it will do things on its terms and for its needs. The only viable strategy for us is to build as much of an international coalition as possible that resists Trump’s imperiousness. We played that game when we had far less power. Our choice is now to succumb to bullying or take a few bruises but stand tall eventually. This debate is not about the technicalities of trade, it is a brutal power play in global politics that must be defeated.

The writer is contributing editor, The Indian Express