Crown of thorns for Imran Khan

Former cricketer Imran Khan has said all the right things a Pakistani prime minister-elect should have said. He spoke of establishing good relations with India and resolving the Kashmir issue. However, in the real world he would have to live in, such a goal would be outside his area of responsibility.

There are democracies and there are democracies. Even those with a great conceit, such as the US, have deep flaws, as is apparent with the Trump presidency. Democracy works in different ways in various countries. And we in India know well that having people elect their leaders is just the most basic attribute of what a democracy should be.

Pakistani democracy, therefore, must be treated as sui generis and its outcome must be respected because it reflects the will of the people, at least up to a point. Imran Khan of Pakistan Tehreek-e-Insaf is not like Narendra Modi’s recent host Paul Kagame, the President of Rwanda, who won 99% of the votes. Nor is he like Saddam Hussein who secured 100% of the votes in 2002, or even Hosni Mubarak who secured 88.6 % of the votes in 2005.

The hallmark really is whether the election leaves a significant Opposition around, never mind the percentage of the vote they command. That is why it is still possible to count Russia, Turkey or Iran in the list of democracies.

The election was systematically tilted against the Pakistan Muslim League (Nawaz), by the shadowy Deep State (read: the Pakistan Army). With its leader and heir apparent in jail on charges of corruption, candidates and voters of the party came under direct pressure to abandon them.

Elections in India in the 1980s saw ballots being rigged, especially in rural areas where foreign election observers could not reach. Dalit villages would be warned to stay away from polling booths on election day. Most millennials wouldn’t know what the phrase ‘booth capturing’ stood for.

That is the reason why elections in India today are conducted under extreme security. The country mobilises its paramilitary, deploys them in great density and conducts polling in phases. The 2014 General Election in India took place in nine phases.

Now, of course, the mighty Pakistan Army was providing election security. But in a single phase, it could simply have not done justice in a country that is, at least, as sprawling and violent as India. The Pakistani jawan may not have taken sides, but the army’s Inter-Services Intelligence Directorate (ISI) most certainly was ‘interested’ in ensuring the defeat of the PML(N). This, especially since Nawaz boldly made his final challenge by breaking the rule of the Pakistani elites and offering himself for arrest instead of accepting exile.

Right now we do not know the contours of the outcome. It would be useful to know how many of the 500-odd candidates fronting for jihadist outfits like the Lashkar-e-Taiba fared. Equally, it would be interesting to see the final outcome in the provincial assemblies. The message is clear the PML(N) has paid for its apostasy of challenging the army.

So, the simplest way to deal with the Pakistan elections is to accept the outcome as being fair, even when we know that they were not entirely so. The PML(N) had failed to cut much ice with the electorate in the last five years. Sharif did manage to stabilise the currency, rebuild foreign exchange reserves and cut inflation, but he could not meet expectations of the people for jobs, cheaper housing and food, electricity and so on.

All through, he had to cope with the Pakistan Army that was never happy with his efforts to mend fences with India. There were successive rounds of demonstrations in 2014 and 2016, paralysing the government. In 2017, he was finally removed by the Supreme Court without the benefit of any trial.

Now, Imran Khan must wear that crown of thorns at a time when the country’s import bill is zooming and the economy has a huge debt overhang that may need an IMF bailout. If history is anything to go by, Imran’s future is not too good.

No matter how the Pakistan Army games it, it has never gotten the puppet PM of its desires. Dictator Zia-ul-Haq’s chosen Prime Minister, Muhammad Khan Junejo, was appointed in 1985 and dismissed in 1988, Nawaz Sharif, selected by the army in 1990 to replace Benazir Bhutto, fell afoul of the army in 1993, and then again in 1999. Another army product, Zafarullah Khan Jamali, was put up as PM by the dictator Pervez Musharraf in 2002 and forced to resign two years later.

The Economic Times  July 26, 2018

Why US-China trade war won’t work

 The China-US trade war is now in full flow. Last week on July 10, the US stepped up its pressure by announcing that it would hike by 10 per cent the tariffs of another $200 billion worth of goods imported from China, ranging from auto parts to food ingredients and construction material. 

Earlier on July 6 the White House had imposed a 25 per cent tariff on $34 billion worth of goods, especially manufacturing components. At the time, Beijing had issued its retaliatory tariffs of its own.

How it began

The war began on March 23 when the US imposed tariffs on steel and aluminium which affected a number of countries including US allies, as well as China. Beijing retaliated with new tariffs on 128 categories of products including pork, fruit, steel pipes and ethanol. On April 3, the US announced a new list of Chinese products worth $46 billion that could face tariffs up to 25 per cent. These included motor vehicles, machine tools, electric motors, machinery, electrical motors, instruments, chemicals, batteries, aircraft parts, nuclear reactors, aero-engines, and so on.

The very next day, April 4, China set out a list of $50 billion worth of products for possible retaliation. These included key US exports like bourbon, beef, soya beans and cars. This announcement enraged US President Donald Trump who said that in view of this “unfair retaliation”, he had asked the US Trade Representative to consider another $100 billion worth of goods for which additional tariffs could be effected.

Photo: Indiatoday.in

So, on June 15, the US imposed tariffs on $50 billion worth of imports from China. This, the Americans said, they were doing not only because of the trade deficit, but because Beijing’s theft of American intellectual property. The first lot of tariffs on $34 billion worth of goods would be implemented on July 6 and those for the remaining $16 billion thereafter.

Sure enough, on June 16, Beijing announced it would retaliate with its own 25 per cent tariffs on $34 billion worth of American goods. The list included the products that had been announced in April. And said there could be additional tariffs of $16 billion on US energy exports such as crude oil and coal. On July 6, both sides announced the imposition of this first round of tariffs, covering roughly $34 billion worth of goods.

This was the point on which Trump threatened to impose a 10 per cent tariff on $200 billion worth of Chinese imports and that the amount could be hiked further. On July 10, the US released the list of the products covered by this. The new list included industries related to auto parts, food processing and construction. The Administration said it would now enter a consultation process on this list which would go on till the end of the next month. In September when this list could be finalised, the US would have begun its election campaign season for the off-year elections.

Global primacy

At this point, Beijing had little to say since it simply lacks the sufficient value of imports to match Washington’s tariffs. The US exports only $130 billion or so of goods to China, while its imports exceed $500 billion. It is increasingly becoming clear that the battle is less about the trade deficit and more about America’s intention of preserving its global primacy. Sober US analysts agree that the rhetoric on the China challenge is somewhat overblown. There are substantial constraints on Chinese power and influence.

Not only is China heavily interdependent on the global economy, especially on the US itself, it also has political difficulties with regional states like Vietnam, India and Japan. The US remains a formidable military and economic power which has close relations with many of the states with whom China has difficulties.

But what has caused alarm has been China’s drive to achieve technological dominance? Ascendancy in key areas of technology could well lead to a shift of regional equations in its favour. Many feel that it may already be too late to do anything about this. China has already created an ecosystem of R&D facilities, industries and ancillaries to push for its dream of becoming the global leader in AI, robotics, biopharma, electrical vehicles and so on. The US may be able to delay the Chinese in a range of areas, but not entirely stop them.

Chinese whispers

As of now, many of the analyses are based on interpretations of Chinese actions, not any comprehensive understanding of them. Chinese purchase of Western technology, their acquisition of European and American companies, the role of the state in promoting this process, have all engendered legitimate suspicion as to Beijing’s motives. But seeking to turn the clock back by blowing up the global trading system, restricting investments by Chinese companies or blocking Chinese nationals from the US educational system could well be the equivalent of cutting your nose to spite the face.

Mail Today July 16  2018

Global Economy Will Pay the Price of Escalating US-China Trade War

The trade war has begun. The US began implementing 25% tariffs on $34 billion worth of goods from the morning of July 6. US tariffs on Chinese imports include semi-conductor chips assembled in China, plastics, dairy equipment, motor vehicles, electrical  equipment, oil and gas drilling platform parts, chemicals and lubricants. Earlier, it had put tariffs on washing machines, solar panels, steel and aluminum.

In retaliation, Beijing has hit the US with retaliatory tariffs on 545 products, targeting goods produced in states that voted for Donald Trump in 2016 – products like soybean, beef, fish, fruits, vegetables, dairy products, bourbon, cotton, tobacco and motor vehicles.

This is said to be the biggest tariff application by the US since the Smoot-Hawley tariffs which deepened the Great Depression and led to a collapse of world trade, which declined by 66% between 1929 and 1934.

The immediate situation is not alarming. But the tit-for-tat tariffs could get out of hand. The US is also involved in a tariff war with the European Union. In June, the EU put $3.2 billion tariff on US goods in retaliation for the Trump administration’s steel and aluminum tariffs that came into effect on June 1, targeting products like bourbon, orange juice and motor cycles. India, which is also affected, says it will  increased tariffs on 29 US products, including walnuts, chickpeas and almonds from August on. Canada and Mexico have slapped retaliatory tariffs on US exports as well.

Shipping containers being loaded onto Xin Da Yang Zhou ship from Shanghai, China, at Pier J at the Port of Long Beach, California, US, April 4, 2018. Credit: Reuters/Bob Riha Jr./File Photo

Now, the US plans to hike tariffs on another $16 billion worth of Chinese goods. After that, the sky is the limit. Trump has threatened that he could impose  tariffs on all Chinese imports into the US totalling more than $500 billion. Beijing does not export that much to retaliate in kind, but respond it will.

The fallout

According to analysts, the direct impact of the tariffs, even if 25% were to be imposed on everything the US imports from China, will only reduce Chinese growth by 0.5%. But the warfare could spread to other countries and to areas beyond trade. Already in June, the Trump administration had curbed visas for Chinese students and the administration and Congress are making plans to restrict Chinese investments and technology exports to China. As the ZTE instance revealed, this could be devastating for some of the Chinese giants.

However, the Chinese have sought to calm fears among US businesses that they would take recourse to unnecessary inspections, product quarantines, administrative punishments and regulatory delays to harass them. But there is no saying what direction the future could take. The “qualitative” measures that the Chinese threatened to take would not be easy to pin down.

Chinese vulnerabilities are manifest. These became evident when the US shut down ZTE in April, an act that brought the telecom giant to the brink of collapse because it cut off the supply of micro-chips needed for its products which are imported from the US. Essentially, while China may make phones, telecom equipment, computers which account for  a third of its exports, it requires to import chips from abroad.

Aware of this vulnerability, Beijing is trying to develop a chip industry by hook or by crook. It has invested $150 billion to build the industry through its Made in China programmes. As a part of this, it has been seeking to buy established manufacturers abroad, as well as putting in a great deal of R&D effort at home.

The US is well positioned in its offensive. Its economy had grown at a brisk pace and the jobless rate has declined even further and wages and incomes are on the rise. So, for the present, the Trump administration does not have to worry too much. In this perspective, it could prove to be an electorally useful tool. This means that from the US point of view, it can stretch its fight to the coming year. On the other hand, China has been in the midst of trying to reduce the debt levels of its economy, leading to a slowdown of growth.

The rest of the world and India should not be particularly happy at the turn of events. A prolonged conflict and the disruption of global supply chains can have a ripple effect on the global economy. Many of the products facing American tariffs have components and assemblies that are made in third countries which would be affected as well. Indeed, given the way supply chains work, the US consumer could well end up paying higher costs for consumer products. An all-out trade war could lead to a collapse of global trade and shove the world economy towards a recession.

US President Donald Trump holds a signed memorandum on intellectual property tariffs on high-tech goods from China, at the White House in Washington on March 22, 2018. Credit: Reuters/Jonathan Ernst/Files

The bigger picture

There is no doubt that the two principals see the issues as going beyond just trade and tariffs.

A strong section of the Trump administration sees the struggle as one of primacy where China is seeking to craft a new industrial policy under the rubric of Made in China, to become the number one country in the area of artificial intelligence, robotics, aerospace applications, electrical vehicles and biotechnology. They have made no bones about their desire to promote their companies in these areas. The Made in China programme was outlined in a public document by China’s Cabinet, the State Council. Equally, the Trump administration now says that China has all along been cheating the US by illegally acquiring technology worth hundreds of billions of dollars and tilting the playing field against foreign companies in China.

A larger struggle that has been unleashed ever since the US came up with its new National Security Strategy document that has depicted China, along with Russia, as strategic competitors. For decades, western countries believed that China would eventually become a market economy, but what China has been saying and doing is to make it clear that while the market is used to allocate some resources, the state led by the Communist Party of China runs the economy.

Despite everything, the Chinese still see this era as one of strategic opportunity. In his address to the important Central Conference on Work Relating to foreign Affairs that was held in June Xi noted that the world was “undergoing the most profound and unprecedented changes in a century” but that the period between now and the next Party Congress in 2022 was “a historical juncture for realising the two centenary goals of China”.

Whether all this presages a new Cold War only the future will tell. But many specialists are arguing that this need not be seen in apocalyptic terms. Given the scale of their engagement and their global footprint, engagement between China and the US remains important for the world. There are many steps that can be taken before a total breakdown. The US could, for example, enhance its scrutiny of China’s investments. Beijing, for its part needs to do much more to provide a level playing field for foreign investors. It has already signalled its desire to open up important sectors of its economy. However, China is unlikely to abandon its Made in China plans which can be slowed by the new US policy, but cannot be stopped.

The Wire July 10, 2018

Trade Relations Over the Edge as Beijing, US Sharpen Knives

On Monday, President Donald Trump ordered the US Trade Representative to identify “$200 billion worth of Chinese goods for additional tariffs at a rate of 10 per cent.” This comes in on top of the$50 billion worth of tariff increases that were announced on June 15. It’s not clear when these would kick in, though July 6 is one date being spoken about, which does leave time for some negotiations.

But the announcement seems to be inexorably driving US-China relations over the edge. Because the Chinese Ministry of Commerce declared that China would have no option by to take measures to strike back. They accused the US of blackmail and going against the agreement the two sides had reached through multiple rounds of consultations.

Observers have noted that China imports $130 billion of goods from the US and so doesn’t have the ability to match Trump’s total additional tariffs which have now reached $250 billion. But, China could target US companies doing business in China. Companies like General Motors, Apple, Walmart and others operating in China are doing well and keen to expand their businesses. Last week, for example, Google announced that it would invest $550 million in the Chinese e-commerce site JD.com. Beijing had the option of using customs delays, tax audits, inspections, administrative penalties and production delays to cause huge problems for them. What the current cycle of punitive tariffs can do is to disrupt the global supply chains in ways that undermine the confidence of investors and businesses.

The Americans are betting that their booming economy will enable them to take on China. But China’s $13 trillion economy is no pushover. In any case, Beijing can whip up nationalism and being an authoritarian state, keep the country in line through a variety of measures.

Both the US and China use coercive economic tactics. But where the US uses formal processes, such as sanctions, trade controls and investment restrictions that are formally arrived at through legal processes, China tends to do it through applying domestic rules, phytosanitary regulations, and even informal boycotts to pressure specific companies. This last tactic was used against the South Korean company Lotto for permitting land under its control to be used to emplace the US THAD anti-missile system in South Korea.

In all this, the Senate’s vote to reimpose a US ban on the Chinese telecom giant ZTE is a wild card. Both Houses of Congress have passed measures to sanction the company, and now their versions must be reconciled. In the meantime, White House is scrambling to prevent the President from either vetoing the legislation or getting involved in a confrontation with Congress.

It may be recalled that in April, the US Commerce Department had initially imposed a seven-year ban on American companies doing business with ZTE. Subsequently, Trump took up the issue and said he had struck a deal with President Xi Jinping. As a result, the company was allowed to operate in the US after paying a $1 billion fine and embed a US compliance team with a new management. US critics were outraged at this because ZTE had clearly violated US laws and by making a deal with Xi, Trump virtually surrendered invaluable US leverage in the trade fight against China.

In the meantime, the Chinese are also taking longer term measures to meet the criticism that they prevent foreign investment in too many areas. So, a new negative list is being released and restrictions on energy, resources, infrastructure, transportation, and professional services will be removed or loosened. The new list will have two sections, one which will be operative nation-wide, and the other which will be restricted to pilot free trade zones.

As it is, earlier this month the Wall Street Journal reported that over the years, Chinese steelmakers have been shutting production at home and expanding it abroad to access global markets. Western governments have been complaining that Chinese manufacturers have been getting hundreds of billions of dollars of state support to build or purchase plants abroad through banks such as the China Development Bank and the Bank of China and various Chinese investment funds.

Like the US, the Chinese economy is also buoyant. The Chinese companies are in an upswing. According to Bloomberg, the five biggest US technology groups like Apple and Microsoft spent $228 billion in stock buybacks and dividends, while the five top Chinese companies spent just $10.7 billion and put the rest of it into investments that enhance their spread and influence globally.

What the current brawl is doing is to distract China from serious economic reforms that it must undertake to keep its economy on a growth path. In the main this relates to curbing the tendency of its companies to borrow money to grow. Dealing with the huge debt burden is a major challenge that Beijing must overcome to rebalance its economy.

Of course, the biggest battle is for China to protect its grand industrial strategy called “Made in China”, but that is exactly what the Trump Administration is now targeting. They want the Chinese to curb their massive $300 billion programme to become leaders in a slew of industries ranging from computer chips, commercial aircraft, pharmaceuticals and electrical vehicles. This is so intrinsic to the goal of making China a middle-income country that Beijing will not, and probably cannot, move back without serious political consequences for the Communist Party.

The Wire June 22, 2018

Losing the way: BJP has panicked out of the PDP alliance, beyond that is a larger failure

BJP has somewhat casually abandoned the Jammu & Kashmir state government that it ran in a coalition with PDP for the past three years. Almost certainly, this is an act of panic, occasioned by the coming general elections.

Jammu is the heartland of BJP, the place where the founder of their precursor party Syama Prasad Mookerjee attained martyrdom fighting against the special status the state had got for acceding to India. For many in BJP whose political ancestors did little in the country’s freedom movement, the struggle for the full integration of J&K with India is an expression of their nationalist past.

The highly political Dogras of the state, concentrated in the Jammu area, have made it clear that they will pursue their own version of national interest, if the central BJP leadership cops out. And so it was in 2002, when the Jammu Mukti Morcha undermined BJP, ensuring that its tally plummeted to a single seat in the state assembly. They are a bellwether electorate for BJP in the north and clearly, the party heard their message and decided to precipitously dump PDP before the next Lok Sabha elections.

In doing so, however, BJP which runs the Union government of the country has abdicated the leadership role it promised to play when it formed the government following the 2014 general elections.

An important aspect of the role was to shepherd the J&K state past its troubled years. All Union governments have played that role to varying measures of success. They have negotiated with separatists, even militants, reached out to Pakistan, appointed interlocutors, proposed ameliorative measures and promised political packages towards an effort to resolve the problem within the bounds of the Constitution and democracy.

Take the worst period between 1990-93 when the state was under Governor’s rule and a fierce battle was being waged against the separatist militants, leavened by Pakistani proxy warriors. The Lok Sabha poll of 1991 couldn’t be held in the state. The National Conference and Congress had melted down, there were no separatist politicians to talk to. So they had to be constructed and so, the Hurriyat was. Whatever may be said about their Pakistani connections today, let’s be clear, they are a creature of Indian endeavours whose goal was to push the gunmen into the background.

Slowly and steadily, the Union governments of the day encouraged the re-establishment of “normal politics”, pushing through a somewhat farcical Lok Sabha poll in May 1996 in which the National Conference stayed out. But in the state assembly elections later that year, the NC came back on Prime Minister Deve Gowda’s promise of “maximum autonomy”, and swept the poll. And in 2002, perhaps the first free and fair poll in the state, we saw the rise of yet another centrist political formation in the Valley, the People’s Democratic Party.

There is no need to recount the subsequent history of the state except to say that each election since saw a higher turnout than before, it also saw a vigourous contest not just between the so-called national parties like Congress and BJP, but also Kashmiri parties like PDP and NC. Taken together, NC and PDP, and the separatist Hurriyat, in their own way, ensured that the gun culture began to decline. That, in any case was the intention of promoting what we call “democratic politics” by a succession of prime ministers belonging to different parties, including BJP.

The Modi government’s task was not to defeat the militancy; it was already down and out when BJP came to power in New Delhi. Its task was to finesse a political settlement in the state. In agreeing to a coalition with PDP, Modi showed that he was willing to play that role. After all, who would have thought BJP of all parties would be willing to tie up with the “soft separatists”? But somewhere down the line it lost its way and as the Kathua rape case showed, its moral compass as well.

It’s been four years since Modi and BJP took charge of J&K affairs and they have little to show for it. All we have seen is a reliance on security forces to keep a lid on things. The politicians have not just abdicated their role, but added fuel to the fire where they could.

Times of India, June 23, 2018

India-US ties are strong – but for a price

We should not be distracted by the second postponement of the 2+2 dialogue between India and the US. The way it was done, suggests that it was, indeed, an outcome of an immediate requirement rather than any deliberate slight.

But there are other developments that point to the increasingly strong headwinds that India must confront its relationship with the US. These ties have grown enormously in recent years. They feature closer political coordination between the two countries, significant arms sales from the US to India, high-level visits, multiple forums of engagement at the ministerial and official levels, and regular military exercises.

The closer the two countries are getting, the higher the price New Delhi is being asked to pay.

Non-alignment

Strangely, the closer the two countries are getting, the higher the price New Delhi is being asked to pay to bring the relationship closer. In some ways it appears that as the relationship moves from dating towards a marriage, India is being asked for the usual huge dowry.

The two major items in this demand, visible as of now, are the American call for India to break its relationships with Iran and Russia.

The US may be willing to allow New Delhi time to begin cutting its oil imports from Iran, but it’s clear that they must hit zero at a certain point. Iran, it should be noted, is the closest source of hydrocarbon energy to the Indian subcontinent. The second set of items relates to our important defence ties with Russia.

The letter of the American law called Countering America’s Adversaries Through Sanctions Act (CAATSA) is quite clear and would immediately affect new purchases, joint ventures and the acquisition of spare parts and components.

Since the 1960s, Russia has met our defence supplies requirements big and small. The immediate impact could be on the acquisition of the S-400 system, the Project 1135.6 frigates and the Ks 226T utility helicopter deals. But the US law will also hit spares and components, which means some 60 to 70 per cent of India’s defence equipment.

The choices for India are stark. It can comply with the US demands and begin a process that would gut our ties with Iran and Russia. Or it can take a stand and tell the US that it will not accept the extra-territorial application of its laws and will only accept sanctions imposed by the UN. Ironically, the US action in Iran is based on a trashing of international law viz a UN-sanctioned agreement.

Since the 1960s, Russia has met our defence supplies requirements big and small.

Balancing act

Whatever the view from Washington DC is, both Iran and Russia occupy an important place in India’s regional policy and have a geopolitical logic that is specific to India.

To tamely acquiesce with American demands would mean that India has, in essence, abandoned any pretense of servicing its own geopolitical needs. New Delhi has to decide what kind of a power it is. Is it truly a country that values “strategic autonomy” or is that just a slogan of convenience?

The Indo-US entanglement is not new.

From the 1950s we have had differences on our terms of engagement. In the Cold War, the US wanted military allies, India did not oblige and, indeed, reached out to the Soviet Union to meet the military needs the American camp refused to fill. After the Soviet collapse, we have danced a long tango, but have not quite been able to shape a new relationship. The US has consistently failed to understand that India cannot be a partner like Japan or Western Europe for which the US is a net security provider. Armed with nuclear weapons, India faces no existential threat. But it has wider security concerns and needs which require a geopolitical orientation which is different from that of the US.

Iran, it should be noted, is the closest source of hydrocarbon energy to the Indian subcontinent.

Power politics

Beyond issues of world order and promotion of democratic ideals, India needs the US in balancing China, primarily because it has failed to carry out the deep restructuring and reform needed to modernise its armed forces and its defence industrial base. But by the same measure, the US, too, needs India to offset the growing strength of China. From the Sea of Japan to the Red Sea, there is no country with the heft of India to give the US-led effort to contain China some credibility.

So, there is a compelling short-term logic for closer India-US ties. But in the longer term, those ties are important also because of the idea of India — this country is pursuing a democratic, economically vibrant, and technologically advanced civilisation-state. A global power whose destiny as well as its decisional autonomy is in its own hands. The US once said it was willing to aid India in reaching this goal. But today, its narrower vision of its own foreign policy seems to be undermining this promise.

Mail Today, July 2, 2018