The tip of the damaged iceberg

LAST week, Ajit Doval, the powerful National Security Adviser (NSA), spoke of the need for strong and decisive governments, the importance of observing the rule of law, encouraging technological independence and the private sector.

The NSA should have also spoken for a modern government, where institutions and due process prevails, rather than individual whim. India’s governments, and Modi’s in particular, operate in a feudal milieu that privileges loyalty over other virtues.

That was evident in that week itself, when we saw what is probably the real face of the government — a medieval one, with darbaris locked in a bitter internecine war, even as the emperor watches silently. Doval himself, according to reports, played a significant role in the sordid drama that saw the chief of the Central Bureau of Investigation (CBI) being removed in a midnight coup.

Given the past judgments and directions of the Supreme Court in relation to the autonomy of the organisation, the government’s moves appear suspicious and may not be quite legal. Indeed, there are some who now see the Supreme Court’s intervention as a victory for Prime Minister Modi. In fact, it is quite the opposite. The apex court directions have complicated the situation from the government’s point of view. They may have brought respite to the paralysed PMO that was unable to act till the last minute, but the bigger questions remain.

The government could well have done all this more transparently. But, maybe, Doval thrives on drama, or, perhaps, there is more to the report that the action was aimed at Director Verma for initiating action on a complaint on the Rafale deal by BJP dissidents Arun Shourie and Yashwant Sinha and lawyer Prashant Bhushan. 

There was a certain theatricality in issuing a midnight directive that saw the appointment of M Nageshwara Rao as an interim head of the CBI and both Rakesh Asthana and Alok Verma being informed by pre-dawn messengers that they were being sent on leave. Simultaneously, the new Director Rao immediately transferred officers perceived to be close to Verma and involved in the Asthana investigations. Rao was only declared ‘interim director’ as an afterthought when the matter headed for the apex court.  And Rao’s own record for impartiality looks a bit dodgy.

The apex court’s fetters on the CVC inquiry and interim director Nageshwara Rao indicate that it is following a cautious but sceptical approach. It has yet to hear on the main matter — the decision to send Verma on forced leave, given the fact that the Vineet Narain judgment commits the government to give a two-year tenure to the Director CBI. Verma is scheduled to retire in three months.

Accusing the Congress of coterie politics has been the stock-in-trade for the BJP. But in terms of style, the Modi government has been no different. He has also resorted to darbari politics, dependent on ‘loyalist’ IAS and IPS officers. Not surprisingly, those who served Modi in his long tenure as Chief Minister of Gujarat have found places of authority in his prime ministerial dispensation.

Modi always wanted Asthana, an old associate from Gujarat, at the head of the ‘caged parrot’ agency. On December 2, 2016, as Additional Director he was appointed the ‘interim director’ of the CBI when the incumbent Anil Sinha retired. Special Director RK Dutta, who was senior to him, was shunted out to a new post in the Union Home Ministry as a Special Secretary, just two days before Sinha’s retirement.

Since Asthana lacked the seniority to be confirmed to the post that is statutorily appointed by a committee comprising the Chief Justice, leader of the Opposition and the PM, he had to give way to Alok Verma who was appointed to head the agency on February 1, 2017. Since then, an incipient civil war played out in the agency, where Asthana, with the help of the PMO, sought to undermine his boss, and where the boss, no slouch himself, gave as good as he got.

Some will say that the CBI has always had such problems, and hark back to the tenures of Ranjit Sinha and AP Singh. But the parallel drama taking place in another institution — the Enforcement Directorate (ED) — indicates that there is a larger problem. In the ED, following the retirement of Karnal Singh, Sanjay Mishra has been appointed its interim director. Attention is focused on Rajeshwar Singh, Joint Director of the ED, against whom an inquiry has been initiated following his falling out with Hasmukh Adhia, the powerful Finance Secretary.

This could well be the tip of the damaged iceberg that is the Government of India. The state of other institutions like the Election Commission or the Information Commission has also drawn concern. And on Friday,  RBI Deputy Governor Viral Acharya warned that the government’s efforts to undermine the institution could cost the country heavy.

So, yes, India needs strong, decisive governments that uphold the rule of law. But it also needs governments that understand the importance of institutions and also that the law of the land applies to these institutions. It, most certainly, does not mean — as Doval probably thinks it does — a country where people must obey the law. In fact, it is a process to check the arbitrary exercise of power by subjecting it to due process.

The Tribune October 31, 2018

Ajit Doval’s Speech is Ironic, Given His Govt’s Take on CBI Row

It would be difficult to take issue with any of the themes that National Security Adviser (NSA) Ajit Doval took up in his Sardar Patel Memorial Lecture on Thursday, 25 October. The highly cerebral Doval, who has a reputation for operational efficiency, declared:

1. India needs a strong, stable and decisive government for the next decade; weak coalitions will not do.
2. India cannot be a soft power because it needs to take hard decisions.
3. India needs to have a big, globally competitive economy and it can be that only if it is technologically ahead.
4. Populism is bad and against the larger national interest.
5. Indian private sector companies should promote India’s strategic interests.
6. Rule of law is extremely important and the temptation to undermine it should be resisted.
7. Hard power and large armies don’t win battles’ technological superiority does.

Also Read : Need Stable Govts for 10 Yrs, Weak Coalitions Bad: NSA Doval 

Too busy to read? Listen to this instead.

Ironically, his speech came on the same day when the government made short work of the rule of law and its intelligence officers were caught, apparently while maintaining surveillance over the head of the CBI, who had been replaced in highly questionable circumstances the night before.

Govt Response to CBI Row Has Been Dodgy

In 2014, for the first time in 30 years, India did get a government that was not a coalition. Its leader had a reputation for decisiveness and his authority over the government and the BJP was untrammeled. As a bonus, crude oil prices, a critical factor for the Indian economy, had halved over the previous year and remained low till 2017.

Prime Minister Narendra Modi promised a corruption-free government, a government that would be decisive and push for market-friendly reforms. The reality we have just witnessed is of a government that was paralysed as the number one and number two in its premier investigation agency accused each other of corruption. The government response has been dodgy, to say the least.

As for decisiveness, yes, Modi was decisive, but he brought on the demonetization, one of the greatest policy blunders of recent times. This was compounded by the shoddy roll out of the GST. There has been reform in a number of areas like taxes, bankruptcy, etc. But none have been decisive in giving the economy the fillip it needs.

Also Read : From Aadhaar to CBI, Mapping Modi Govt’s ‘Don’t Care’ Attitude

As for a technologically advanced military, ready to fight fourth-generation contact-less wars, the record of the government is less than shoddy. The Modi government has seriously underfunded the armed forces.

India’s defence budget is just 1.57 percent of the GDP, the lowest since the disastrous China war of 1962. But this is not the issue, what is more germane is the fact that all three Services have been seriously short-changed when it comes to capital outlays which are used to buy new equipment.

In the case of the army, the allocation of Rs 21,338 crore was not even sufficient to meet the committed payments of Rs 29,033 crore for past contracts. It is this new equipment that will ready the military to fight the kind of wars that Doval was referring to, and as of now nothing is happening on that front except talk.

Of course, blame for many of these things cannot be laid on Doval. A lot of the really important mis-steps must be blamed on the prime minister himself, or his finance minister.

As it is, there is a tendency to over-state Doval’s authority over the government. Though, it cannot be denied that he has gained unprecedented responsibilities in comparison to his predecessors, barring Brajesh Mishra, who was also Principal Secretary to the Prime Minister.

As NSA, in any case, he supervises the intelligence agencies, is the points man for the China and Pakistan policy, and heads the executive council of the nuclear command authority.

Doval Must Accept Responsibility for His ‘Ill-Conceived’ Strategies

Earlier this year, the government, in its wisdom, decided to make him the chair of the Defence Planning Committee, a highly unusual arrangement that has sought to provide a measure of integration over India’s stove-piped and scattered defence management system.

Its not clear, as of now, as to whether this innovation will yield results, or that it is merely an effort to brush the major problems afflicting our defence system under the carpet.

Doval has carried out significant changes in the National Security Council system that he heads and expanded its remit. The latter fact testified to by its hugely expanded budget and the National Security Council Secretariat’s take over of the entire Sardar Patel Bhavan in Parliament Street, where it had occupied some half the space till recently.

Doval’s supporters will argue that we laymen do not know the secret and internal changes that he has affected. That is true. But we are witness to the many public failures of the government on the security front.

Again, it would not be right to lay it all on Doval’s head. But in some instances, he must accept responsibility for substandard operations and ill-conceived strategies.

In the first category, it is difficult to forget the poor response to the Pathankot attack. Despite being forewarned, Doval, who was personally in-charge of the operation, botched the Indian response.

Then, his hard-line strategy in Jammu & Kashmir is far from yielding a dividend and his policy has led to increased tensions. As for China, after a policy of irritating Beijing by promoting the exiled Tibetans and Uighurs, even while belabouring it for not backing India’s case in the NSG or in proscribing Masood Azhar, Doval’s boss, Prime Minister Modi, decided that discretion was the better part of valour and has smoked the peace pipe with Xi Jinping in Wuhan.

Analysing Doval’s record is important for getting a measure of the importance of what he said in his lecture on Thursday.

Certainly, India needs a strong, stable and decisive government, a government that promotes business and technology acquisition and hews to the rule of law. But it also needs a government that is competent.

The government Doval has worked for, unfortunately, has not quite displayed an ability to execute policy effectively.

The Quint November 13, 2018

Why Did India and China Sign Their New Security Agreement?

The signing of an internal security agreement by India and China last Monday is an indicator of the special nature of their relationship. This features competition, conflict and cooperation. We all know the points of conflict – the disputed 4,000-km border, Pakistan, the Masood Azhar issue, and the question of India’s NSG membership.

Lesser known are areas of cooperation – India’s membership in the Beijing-sponsored Asia Infrastructure Investment Bank, our membership in BRICS, the Shanghai Cooperation Organisation (SCO), the Conference on Interaction and Confidence Building Measures in Asia (CICA) and in various international bodies on a range of issues.

China is India’s biggest trading partner and a large market for Chinese products, and Indian retailers are keen to acquire cheap Chinese goods to market

The New Trend

The new agreement can be seen as part of the new trend in Sino-Indian relations initiated by the Wuhan summit between Prime Minister Modi and President Xi Jinping earlier this year.

The pact focuses on terrorism, narcotics and human trafficking, intelligence sharing and disaster management. The significance of the agreement is obvious from the fact that the signatory on the Indian side was the Union Home Minister Rajnath Singh, and the Chinese Minister of Public Security Zhao Kezhi.

Zhao is a politician and police officer who was elevated to his current office in the last Communist Party Congress in November 2017. China’s Ministry of Public Security is responsible for the internal security and day-to-day policing of the country.

Negotiations for the agreement began in 2015 following Union Home Minister Rajnath Singh’s visit to China. Initially, the Chinese wanted separate agreements for the different issues, but in the wake of Wuhan, they accepted the idea of an umbrella agreement.

The Wuhan summit itself came after the two-month standoff between the Indian Army and the People’s Liberation Army in the India-China-Bhutan trijunction on Doklam plateau.

Besides Doklam, Sino-Indian relations had been roiled by the Chinese refusal to support India’s candidacy to the Nuclear Supplier’s Group and to put a hold on India’s efforts to have Jaish-e-Muhammad chief Masood Azhar put on a UN list relating to terrorism.

In turn, the Chinese were unhappy over New Delhi using the Tibet card by inviting the head of the Tibetan Central Administration Lobsang Sangay to Prime Minister Modi’s inauguration, and to have a Union Minister welcome the Dalai Lama to Tawang in Arunachal Pradesh.

What Are the Issues?

Having used megaphone diplomacy to assail China for not supporting our NSG or Masood Azhar case, New Delhi is now using an orthodox diplomatic approach to persuade the Chinese of its case. So far, Indian officials say, the Chinese have not budged on these issues. But it is possible that some patient diplomacy will yield results.

China, too, has worries about terrorism, emanating from separatists in Xinjiang. The Chinese are making extraordinary efforts to stamp out Islamist ideas in their western province and are sensitive to the movement of Uighurs around the world.

Recall the episode in 2016 when India granted and later withdrew a visa given to Dolkun Isa, an Uighur activist who was scheduled to attend a conference of Chinese dissidents in Dharamsala, where the Dalai Lama resides. Subsequently, some other Chinese dissidents, too, were denied visas.

Beyond these high-profile issues, the agreement will be of practical use to deal with issues of mutual interest, such as narcotic smuggling, human trafficking, and disaster management.

With the movement of Indians and Chinese in each other’s countries, there are often issues relating to arrests and imprisonment of their respective nationals. The agreement can pave the way for dealing with such issues and lead to the signing of an extradition treaty between the two countries.

A Sidelight of the Meeting

Beyond terrorism, India also wants an agreement to deal with transnational crimes and cyber crimes, and to deal with white-collar criminals, as China has well-known capabilities in the cyber area. The agreement will feature an important component of exchange of information that will help in pre-empting criminal acts. Towards this end, the plan is to set up a 24x7 hotline to facilitate the exchange of information.

The agreement has little to do with the Sino-Indian border dispute, which is handled through other mechanisms and agreements. But it will definitely deal with cross-border infiltration and, more importantly, disaster management. Because rivers flow from China into India, there are often situations where forewarning is vital to prevent casualties from floods or landslides downriver.

An interesting sidelight of the meeting were the activities of Kiren Rijiju, the Minister of State for Home Affairs, who hails from Arunachal Pradesh – a state claimed in its entirety by China.

Rijiju was kept out of the meetings, but called in at the last minute to participate in the formal signing ceremony.

His absence had provoked questions from the media and it is believed that he was told at the last minute to participate in the signing ceremony.

The Wuhan summit has set the tone of the Sino-Indian relations in the current period. It is aimed at getting the two countries to manage the difficult areas of their relationship and find areas of convergence, and also promote better coordination between them.  The summit also sends an important signal globally, that the two countries are quite capable of handling their differences through dialogue and discussion.

The Quint October 24, 2018

View: It's time to reform the CBI

The Central Bureau of Investigation (CBI) is looking more and more like a slow-motion train wreck. On Monday, there were reports that Prime Minister Narendra Modi had summoned CBI director Alok Verma and his deputy Rakesh Asthana. A day earlier, the agency had booked Asthana as prime accused in a bribery scandal. 

At the same time, it arrested its own deputy superintendent of police Devender Kumar, for allegedly forging a statement to assist Asthana, who had initiated his own corruption complaint against Verma. 

It would be difficult to find a saga as sordid as the one that is unfolding in India’s apex investigation body, where the No. 1and No. 2 are locked in a struggle to the end, accusing each other of corruption. Normally, in such circumstances, the easiest thing to do is to ease out No. 2. But that has not happened. Why? 

The alleged reason is that Asthana, a Gujarat cadre Indian Police Service (IPS) officer, is considered close to the top BJP leadership. Incidentally, he happened to be the man who supervised the 2002 Godhra investigation. The Narendra Modi government had sought to position Asthana as the head of CBI, once called ‘a caged parrot’ by the Supreme Court. As the country’s premier investigating agency, it has been used as a political instrument by governments down the years. The present administration, too, may not have held itself back from unleashing it on political opponents, perceived or otherwise. 

Asthana was appointed additional director, CBI, in December 2016, and promoted to the rank of special director last October. This took place over the objections of CBI director Verma, who had been appointed in his current position in January 2017 and is believed to have informed the selection committee of the serious corruption charges against Asthana.

Efforts to reform the CBI have been going on since the famous Vineet Narain judgment of 1997 through which the Supreme Court gave a set of directions to the government to ensure the autonomy of the organisation. By 2013, it was clear that reform efforts had failed. This is when the Supreme Court had made its infamous observation that the CBI “was a caged parrot speaking in its master’s voice”. 

The apex court then sought an undertaking from the then-UPA government that it would provide more autonomy to the outfit. But such are the powers and political uses of the organisation that no government has been willing to give it the autonomy it needs to function as a professional investigative agency. 

Read more at:The real problem for the CBI lies in its charter of duties. These are not protected by legislation. Instead, its functions are based merely on a government resolution that draws its powers from the Delhi Special Police Establishment Act, which makes the CBI the premier investigative arm of the Union government. 
Every successive government has found it useful to keep the ‘parrot in the cage’ to make it do its (dirty) work. The present government seems to have been no exception. 

Corruption in the CBI has always been spoken of in undertones, for the simple reason that it is the nation’s apex anti-corruption investigation agency. Its action — or inaction — can make or break a major case. Obviously, if there are corrupt officers in its midst, they are in a position to benefit illegally. 
So far, the prime minister has not spoken of the shambolic goings-on in an organisation that reports directly to him. Indeed, it’s not clear whether he will do so at all. Modi is walking a tightrope. He has made claims that he runs a corruption-free government. 

But if the CBI has filed an FIR charging its No. 2 with alleged corruption, then a proverbial can of worms could open up. 

Prakash Singh, former director general of the Border Security Force (BSF) — who has been trying to push the government to reform India’s police forces for the last 20 years — has noted that whenever there are no political overtones to the case, the CBI does a good job. But when politics comes in, things appear to go ‘round and round’. 

IIn Singh’s view, besides appointing the head of the CBI through a collegium, as recommended by the Lokpal Act, the government must ensure financial autonomy for the outfit. Essentially, he has rightly suggested that the CBI should be given statutory status through legislation equivalent to that provided to the Comptroller & Auditor General (CAG) and the Election Commission (EC). 

Maybe, this sorry episode will trigger the long-sought-after reforms in the CBI that have been ‘postponed for decades.. 

The Economic Times October 24, 2018

New Bhutan government's attitude towards India is not clear. This should worry India

It’s a measure of our attitude to neighbours that the outcome of the third, and possibly most consequential general elections in Bhutan that took place last Thursday, hardly figured in the Indian media the day the results came out, last Friday.

Bhutan Election hardly figured in the Indian media. (Photo: AP)

The decisive victory of a party, Druk Nyamrup Tshogpa (DNT), which was set up only in 2013, is a signal that the voter is looking for change, both within the country, as well as in its relationship with the outside world.

Indo-Bhutan relation

The DNT, headed by surgeon Lotay Tshering, won 30 out of the 47 seats to the National Assembly, while its rival Druk Phuenseum Tshogpa got the other 17 in a run-off, which is limited by the Bhutanese law to just two parties that got the maximum number of votes in the first primary round of the election that was held September 2018 and that saw the shock exit of the ruling People’s Democratic Party.

That round saw the DNT and DPT neck and neck, but in the final round, the DNT has surged ahead.

The DPT had won the first election in 2008 and sat in the Opposition in the 2008-2013 period.

It is a measure of Bhutan’s size that the total electorate is 4,38,663 only, of which 3,13, 473 cast their votes.

Dr Lotay Tshering (Right), the Prime Minister-designate, is an MBBS from Dhaka University. (Photo: Facebook of Dr Lotay Tshering)

The DNT’s slogan “Narrow the Gap” focused on the need to reduce inequalities, promote affordable healthcare and restructure the economy. It clearly struck a chord with the electorate.

Dr Lotay Tshering, the leader of the party and the Prime Minister-designate, is a noted urologist who worked at the Jigme Dorji Wangchuck National Referral Hospital till 2013.

Selected by the party to contest the elections, he paid the equivalent of Rs 60 lakh indemnity to leave the Royal Civil Service. It was only in May 2018 that he was elected as the head of the DNT. Tshering is an MBBS from Dhaka University, Bangladesh and has another degree from Australia.

Reports suggest that India was not a factor in the elections this time, though there should be no doubts that the elections can and will have consequences for Indo-Bhutan relations.

In 2013, Bhutan was hit by high fuel prices when India withdrew subsidies for kerosene and gas on the eve of the elections. The move was seen as a signal of New Delhi’s annoyance with the Bhutan PDP. The party lost the election that year, even though India claimed that the subsidy withdrawal was a ‘technical lapse’. The DPT, which was seen in the past to be leaning towards China, made it clear in its election manifesto that it sought to maintain and further “excellent relations with the people and government of India.”

The voters were looking for change, both within the country, as well as in its relationship with the outside world. (Photo: Facebook of Dr Lotay Tshering)

Doklam problem

It proposed to enhance electricity production through three new hydropower projects, which would boost Bhutan’s primary exports — electricity to India.

The DNT had no section on external affairs in its manifesto.

However, it pointedly sought to focus on internal affairs such as balancing the economy, which, in its view, was too dependent on hydropower exports.

The Bangladesh, Bhutan India (BBIN) Motor Vehicles Agreement did not figure in the elections.

It may be recalled that in 2017, the Bhutan PDP government had failed to pass an enabling legislation in the National Council, Bhutan Parliament’s upper chamber. There was clearly popular sentiment against the agreement which would have smoothed the motor vehicle movement between the three countries.

The defeat of the incumbent government headed by Tshering Tobgay could not have been comfortable for New Delhi. This is especially because along with the Bhutanese government, New Delhi had managed the crisis over Doklam successfully last year.

The DNT’s attitude towards India is not clear, and neither is its position on Bhutan’s border problems with China that gave rise to the Doklam problem. But it is seen as a party that seeks to focus on economic change.

Chinese connect

Bhutan’s politicians have observed self-restraint in not openly discussing relations with India or its other giant neighbour China. Doklam, which was ostensibly about Bhutanese territory claimed by China, did not figure in the elections.

But Bhutan is in the social media age, and there has been a lesser degree of restraint.

Foreign policy issues have been raised, even though Bhutan election officials have levied fines on candidates, some for making charges relating to ties with India.

Bhutan presents a unique challenge for India.

On the surface, relations between the two countries are excellent and Bhutan’s geography ensures that India holds it tightly. Nevertheless, things are not exactly what they appear, and so, the upset defeat of the PDP, which was seen as being close to India, must be carefully analysed.

The DNT is a new factor and New Delhi must resist the temptation to look at relations with Bhutan through only the lenses of security.

Mail Today October 23, 2018

Greek shadow on US-China ties

IN 2015, Harvard scholar Graham Allison penned an article in the Atlantic monthly. Its theme, later developed into a book published in 2017, was that the US and China could be at war at some point in the near future. This, he said, was because of the ‘Thucydides trap’, an idea developed from a 431 BC observation of the eponymous Greek writer, apropos Athens and Sparta, that a rising power will inevitably clash with the established one. In the article, Allison said in 12 of 16 cases he had studied in the past 500 years, such a clash occurred, mostly to the detriment to both the challenger and the challenged.

Coming in the years when China, with an assertive new leader Xi Jinping began to consolidate its presence in the South China Sea, built a modern navy that began forays into the Indian Ocean and laid plans to establish new global maritime and land links,  the idea took root. Despite the US push back through its Freedom of Navigation Operations (FONOPS) in the South China Sea and its so-called pivot to Asia, most people discounted the notion of war between two nuclear armed adversaries whose economies were  deeply enmeshed in each other.  

 Indeed, shortly after Allison’s article appeared,  Xi Jinping went out of his way to actually mention the concept even while rejecting it. ‘There is no such thing as the so-called Thucydides trap in the world’ he declared at a public meeting in Seattle, though he did  warn against ‘strategic miscalculation’ that could lead to conflict.

 So, what are we to make of what sounds like the steady drumbeat towards war, with perhaps a Cold one to start with, but with always the danger of degenerating into a hot one.  

 Three decisions alone last week are a pointer to the rapidly deteriorating China-US relations. The first was the arrest and extradition from Belgium of a senior Chinese intelligence officer Yanjun Xu for economic espionage. He was charged with stealing trade secrets of a number of US aviation companies, including GE. Xu is said to be deputy division director with China’s Ministry of State Security, responsible for recruiting assets in the US aviation sector for industrial espionage.The second was the US treasury department’s announcement of new rules tightening national security reviews of foreign investment. The new rules are part of the overhaul of the Committee on Foreign Investment in the US (CFIUS) and the US export control system as such that were legislated in July. The new regulations bring in a much larger number of transactions into the purview of the CFIUS. The US will now require foreign investors to inform the committee of all deals relating to critical technology in 27 industries ranging from semiconductors, telecom and defence.

The third measure was the tightening of controls on nuclear technology exports to China. Though US officials say that the Chinese are seeking to enhance their military capacity through illegally acquiring nuclear technology, the real target are the civil nuclear exports of China which, the Americans say, involve the illegal diversion of American technology. In January 2017, an American of Chinese origin, Szuhsiung Ho, was sentenced to two years’ prison for helping the state-backed China General Nuclear Power Company to develop special nuclear materials based on his activities in the US.

According to SIPRI, the US was the biggest spender on defence in 2017 with $610 billion, while China was number two at $228 billion. All these developments are taking place after a slew of other moves such as the imposition of tariffs on $250 billion worth of Chinese imports to the US, Vice-President Mike Pence’s blistering attack on China earlier this month, the imposition of sanctions on China under CAATSA for purchasing Russian Su-35 fighters and S-400 missiles, the cancellation of US-China military dialogue and a dangerous encounter between an American and a Chinese warship in the South China Sea. The jury is still out on another, potentially more serious development—the charge that Chinese spies have infiltrated the networks of several US companies by installing very small chips in the server boards manufactured in China that are used in the systems of these companies. If the US confirms this, it could lead to a major effort to remove China from the global supply chains.

 Having worked out trade deals with its neighbours Canada and Mexico as well as South Korea, and begun negotiations with the Japanese, it remains to be  seen whether the US goes for a deal with  China or presses on with its new confrontational approach.

So far China has not revealed its counter moves. It does not import enough from the US to match the tariffs. But it can take other measures ranging from restricting tourism, a $33 billion per annum business for the US, it could devalue the yuan, sell or stop buying the US treasury bills it holds, thus raising US borrowing costs, and finally, make it difficult for US businesses to function in China.

Xi and Trump are scheduled to meet on the margins of the G-20 summit in November. What Trump will do is not clear. His team is divided among those like Treasury Secretary Steve Mnuchin and National Economic Council director Larry Kudlow supporting a deal and US Trade Representative Robert Lighthizer and his National Security Adviser John Bolton opposing it. But the clock is ticking, from January onwards, tariffs on $200 billion worth of Chinese imports will go up from the current 10 per cent to 25 per cent.

 But perhaps too much water has flowed under the bridge to allow for a straightforward trade deal. It may reduce some of the tensions, but the events of the past year have revealed faultlines that cannot be easily papered over. The perception of China has fundamentally shifted in the US, and this cannot be reversed. China is now viewed as a peer competitor, one that does not, and will not, play fair. And so, we still have no answer whether the Thucydides trap is in play, or not.

The Tribune October 16, 2018