After serving as the Barack Obama administration’s point person for India in the State department (2014-2017), Nisha Biswal was appointed president of the U.S.-India Business Council (USIBC), part of the U.S. Chamber of Commerce, last year. Weighing in on the large number of trade issues the two sides face, Ms. Biswal tells The Hindu that India’s regulatory policy needs fixing, and that data localisation requirements may lead to U.S. investment drying up. Excerpts:
From the outside, it looks like this is a new low for India and the U.S., specifically on trade, with imminent deadlines: August 4 is when Indian retaliatory tariffs at the World Trade Organisation (WTO) go into effect; on August 6, the U.S.’s fresh sanctions on Iran go into effect. India’s Generalised System of Preferences (GSP) status still hangs in the balance. How worrying is the current scenario?
Look, there’s definitely a lot in motion right now, and those are definitely concerns we need to pay attention to. I am not overly worried that we are in a crisis, because for all of the different issues in play, there are also dialogues and discussions taking place... [Commerce] Minister [Suresh] Prabhu had good talks with Trade Representative [Robert] Lighthizer and [Commerce] Secretary [Wilbur] Ross, and, as a result of the conversation, you had a USTR team come to India, and now there are joint secretary-level conversations on in Washington.
So, it’s almost a continuous dialogue going on for the past month and, to me, that means that there is a determination to find a way forward, and there is sufficient momentum to continue the dialogue.
Yet, if you list the number of things the two sides disagree on, they don’t seem reconcilable. Eventually, do you think the answer will be a package deal on trade, where each side gives something?
I have long been a proponent of a trade framework agreement... We may not be in a position to have a Free Trade Agreement... but we may be able to look at a package that creates benefits on both sides. What I do know is if you do try to resolve the issues case by case, then each issue becomes an existential situation, but if you try to have a conversation on a group of issues, there is more incentive to find some areas of accommodation for the other. In all my years on Capitol Hill, when I was negotiating with counterparts, we approached it from the perspective of how do you create some “wins” for both sides.
One specific issue, that of Indian tariffs on Harley-Davidson bikes, has become a lightning rod for the differences. The fact that President Donald Trump went public demanding zero tariffs made it difficult for India to do so. On the other hand, India imports very few Harley bikes and so the tariff concession would probably not have meant too much to give in on. A lost opportunity for both?
The reason why the Harley-Davidson [issue] became so high-profile is because it is emblematic of a broader set of principles on tariffs and duties; and also [because] Harley is an iconic American company... The economic implications are not significant, and there is a bigger market for the Harley motorcycles made in India for Indian consumers, but the larger bikes speak emotionally to a lot of Americans and I think the emotions superseded the economic reality. But I’m hearing less now about Harleys and more about the more complicated issues, like market access, trade policies, price controls, data localisation. And I think now we must look at the whole basket of issues.
Some issues with emotional resonance in India are those concerning H-1B visas and spouse visas; the crackdown on immigration in general; and more than 100 Indians being now kept at detention centres. Has the window opened by the “great American dream” now closed for Indians, especially professionals?
No I don’t think that’s a fair conclusion. America is a country that has been built on successive waves of immigration, as people bring their hopes and aspirations and ambitions. America is a country where those ambitions have been allowed to flourish and our country has been able to flourish because of that. That is ingrained in our culture.
But we are in a moment [when], not just in the United States, the sentiment is anti-corporate, anti-globalisation and anti-immigrant. Why is that? Globalisation has been massive and rapid and has created a lot of change in a lot of communities at a fairly rapid scale, which has created a lot of cultural and economic dislocation... So, what you’re seeing is a pushback.
Even though we have, as a nation, benefited greatly from the flow of immigrants, there are pockets of America that have been economically dislocated as the industries that have been the backbone of these communities have moved or changed or become outdated. And nothing has come in yet to take their places. So, they see the massive economic losses and say, ‘but this other community has been flourishing, and immigrants are thriving’.
There is a natural inclination to attribute a causality that perhaps doesn’t exist. Our challenge as Americans is to be able to understand the problems of the dislocated communities. We now have open jobs in America than we have job-seekers to fill them. But that doesn’t mean much to you if you’re in the Appalachians or the Rust Belt, where storefronts are shut and work is hard to come by. There is a need to address these challenges, and as we create that understanding, America will once again become that place that welcomes immigrants, that welcomes talent and innovation from around the world.
To turn to the challenges to the relationship from the Indian side, in April this year, you had said there is a need for more regulatory stability in India. What are the regulations which you referred to?
Well, we are also seeing in India some areas that are pushing back on foreign investment,... While I understand the need to strengthen the domestic industry, I think India will benefit most from being a platform to bring in the best from the world and engaging in the global market... So, the extent to which you have a regulatory framework that creates a level-playing field... will [determine the likelihood of investment].
We are now in a stage where it is very hard to distinguish what’s an American company and what’s an Indian company... The first car plant to open in Detroit in 25 years was of Mahindra, an Indian company. And Mahindra is making investments in Texas, Florida and California as well. Infosys is making investments in so many parts of America and American companies are making so many investments in different parts of India. So, the regulatory framework needs to reflect that and welcome that.
The U.S. has been historically very welcoming of investment, and we would like to see that in India, whether it is an issue like price control policy; or issues concerning data privacy and data localisation. I understand the intent behind them, but some of these blunt instrument policies have the effect of potentially depressing investment.
On data localisation, or the Reserve Bank of India (RBI) ruling that companies must move their data servers to India, the USIBC has made some recommendations. Is the data localisation ruling a deal-breaker?
The question is: how much harder are you [the RBI] making it to do business in India? What if everybody starts enacting data localisation policies requiring companies to locate their data exclusively in their respective countries?
In India, the services [outsourcing/call centre] sector... works on being able to aggregate and run models on data and create applications in multiple places. So, you may have a certain operation in Singapore and another in Bangalore and one in Silicon Valley, and they are all working and connecting with each other.
The moment the government says that this data can be held only in this server, it creates an extra burden that greatly increases the cost, which plays out on the consumer. So, the efficiency of the process is lost.
Given that India’s FDI growth is the lowest in five years right now, do you think investment will dry up if these policy glitches, as you call them, aren’t fixed?
First, let me say: I am very bullish on India. We continue to see a lot of interest by investors in India... But you do see greater anxiety amongst investors.... Everyone understands that during election season, whether in America or in India, you will not see the biggest or boldest policies, so the sentiment is to wait. That said, this is a government that has had its eyes on a larger growth trajectory and I am confident we will see more reforms.
The latest challenge is the sanctions on energy trade from Iran. You are familiar with this challenge from your previous position as U.S. Assistant Secretary of State when the last round of U.S. sanctions kicked in. Do you think there is place for flexibility on this, or will India face sanctions unless it agrees to halt imports?
I can’t speak for the government now, and I know that those are conversations that the two governments are having this week. I also know that India has moved tremendously on diminishing its dependence on Iranian oil... So, I know that the movement is in the right direction. I also know that the U.S.-India energy partnership has grown tremendously... The U.S. has long understood the need for India to manage its relationships with historical partners and always found ways to create space for that.
Given all these various issues, how important is political intervention at the top to resolve the problems in India-U.S. ties. It has taken a year to schedule even the 2+2 engagement, while Prime Minister Narendra Modi and President Trump may not even meet until next year.
My sense is both leaders had a very positive meeting in Washington last June... One of the reasons why USIBC has brought its annual general meeting to India in September this year, after 43 years of holding it in Washington, is because we see that there is a tremendous desire and appetite for elevating the engagement between our two economies. I am fully confident that the political engagement will move [forward], with a [rescheduling of] 2+2 and a [possible] presidential visit [in January]... So, the tempo is beginning to develop again, and we will have an impressive gathering of industry leaders as well as political leaders from both sides in September.
