Amidst potential trade war, US Secretary Mike Pompeo visits India. Here’s why

US Secretary of State Mike Pompeo will be visiting India between June 25 and 27. Pompeo’s visit will pave the way for increased dialogue between Prime Minister Modi and US President Donald Trump on a number of key issues that have been in the news lately— immigration and rumours of a cap on H1B visas for Indians, trade tensions between the two countries, and data localisation.

“… the purpose of the trip is for the secretary to broaden and deepen out relationships in New Delhi,” said a senior official at the US Department of State.

While in Delhi, secretary Pompeo will deliver a public address to young Indians about H1B visas and data localisation. Pompeo is also expected to speak with Minister of External Affairs Dr. S Jaishankar about expanding on mutual security, energy, and space technology related interests.

“I can’t comment on what the secretary’s going to raise in his discussion with the prime minister, but obviously, our focus on keeping the pressure on Iran and welcoming India’s cooperation in that endeavour,” said the official.

Secretary Pompeo’s trip to India is part of an Indo-Pacific diplomatic tour— after meeting with Modi, he will fly to Osaka for the G-20 summit and South Korea.

US-India trade tensions

Pompeo’s trip to India is set against the backdrop of frictional trade relations between India and the US.

In March, the US announced that it was revoking India’s preferential status on the Generalised System of Preferences (GSP), a preferential trade deal that allows developing countries access to American markets without import barriers.

The US said American dairy and medical technology companies are facing hurdles in Indian markets and not being given “equitable and reasonable access” as is a criteria under the GSP.

Also read: Trump pulls the plug on India’s preferential trade status: What this means for the future of trade

The State Department official said, “Trade is obviously going to be a topic of conversation… We’re pleased with the growth in bilateral energy and defense trade, and the narrowing of the trade deficit in recent years. But that’s not to say that we don’t have disagreements”.

The official added that while Pompeo hopes to kickstart dialogue on how to reinstate India’s preferential trade status, he will likely not arrive at any clear cut policy for the future as it is a complex issue that requires more discussion.

Another point of contention between the US and India is Iranian oil

In April, the US said it would end a sanctions waiver for India and other allies that continue to import oil from Iran. The Trump administration has been trying to put pressure on Iran, especially its energy sector and oil imports.

India initially said that it only complies with UN sanctions, not country-specific ones. The MEA added that India needs to formulate foreign policy based on the needs of its own economy.

According to the State Department official, India has now reduced oil imports from Iran. So, as a reciprocal gesture of goodwill, the US will work with India on preserving the Chabahar Port as it allows humanitarian aid into Afghanistan.

The Chabahar Port is in Iran’s Sistan-Baluchistan provinces as serves as a trade conduit to Iran and Afghanistan that bypasses Pakistan. Times of India explains that the Chabahar Port is a huge strategic advantage for India because it reduces transport costs and time, allows access to middle eastern and central asian markets.

The US and India have also butted heads on intellectual property (IP) rights.

The US Trade Representative (USTR) put India on the Priority Watch List for “not adequately or effectively” protecting or enforcing IP rights of American creators and companies. The USTR added that India’s lack of IP framework is negatively impacting American business and that the two countries needed bilateral talks to solve the issue.

New rules on H1B visas, data localisation

The US has also recently announced major changes to its immigration system, making Indians worried about whether or not there will be a cap on H-1B visas because many IT professionals migrate to the US on the H-1B program.

“Indians have contributed under the H-1B program to the U.S. economy, and I think the Secretary will be able to assure the Indian leadership that we have no plans to place caps on H-1B work visas for nations that are having foreign companies store data locally,” said the official.

The official added that the H-1B program is being restructured, but not in a manner that specifically targets India.

Also read: Want to go to the US? Get ready to share your social media deets

India also made important policy decisions regarding data localisation and e-commerce that seem to disadvantage foreign countries. India has said that all data from commercial transactions must now be stored on servers within its borders (data localisation).

So foreign companies need to spend money on digital infrastructure that allows them to store analytics in India itself. Countries like the US and Europe have taken issue with this and urged India to find alternatives because they see data localisation as a barrier to free trade.

The Department of State official also said that the US wants to discuss “increasing tariffs on a range of products, restricting e-commerce operations, and limiting the free flow of data”.

Spokesperson for the MEA Raveesh Kumar said, “We look upon the visit as an important opportunity for both sides to further strengthen strategic partnership and continue high-level engagement on matters of mutual interest.”

Rhea Arora is a Staff Writer at Qrius