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Engaging America - Views on News from Equitymaster
 
 
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  • Dec 15, 1998

    Engaging America

    At the outset, I will clarify that I am not an expert on foreign policy. Having said that, I do not seem to understand the policy of our government towards the United States. I am concerned about our foreign policy because it affects our economy. America may not have the moral leadership of the world but its economic and military leadership is unchallenged. Given the fact that most of the world's largest and efficient companies tend to be incorporated in democratic America, it seemed strange to me that a self-styled democracy like India lost out in economic importance to communist China.

    In 1998, the United States will have a US$ 40 billion trade deficit with China. That trade deficit should be seen as a gift to China. The US$ 40 billion basically buys the Americans products like shoes, plastic tablemats, low priced clothes, stuffed toys, plastic toys, and things of that nature. No high tech stuff. Indonesia, Malaysia, Thailand, Sri Lanka, Pakistan, or India could probably supply all these products. Yet, the Americans prefer to buy them from China even though many suggest that the factories that manufacture these products pay low wages (food and some money) to the workers. And of course, independent unions do not exist; the only union is the Communist Party. So, why does a country like democratic USA deal with communist China (and give it a US$ 40 billion handout) and ignore the other countries?

    Because, my dear policy makers in New Delhi, the business of America is business. And while America talks about a host of values ranging from civil rights, freedom of speech, equal opportunity, and other such idealistic things, at the end of the day everything in America boils down to monetary benefits. If American companies can sell more aircraft to China, and if the insurance companies can do business in China, and if the food companies can sell millions of burgers and soft drinks in China, that is what matters - the rest is a detail or a footnote in history. Money is what makes America tick. The Chinese know that and while they continue to occupy Tibet, they have the Americans dancing on their little finger. Keeping in mind this love for money, the Chinese government uses the Americans to earn US$ 40 billion in trade surpluses every year (15% of India's GDP) in exchange for one televised speech by an American president who preaches about freedom but has himself become a moral embarrassment.

    Taking a few lessons from China, the government of India could frame its economic policies to get what we want and give the Americans what they want, namely, allow the President of the United States to speak on Doordarshan once a year about nuclear disarmament and CTBT. For example, the Americans want to get a piece of our insurance market. Let them in. But make it a condition that for every insurance policy they sell in India they will import a dozen stuffed toys or table-mats from India. If they want a piece of our market, we should be entitled to some of theirs. And each time the Americans demand a tariff reduction on some product, we get to ship a few hundred thousand of our doctors, engineers, nurses, cooks, maids, and drivers to the land of the free. Just like the Made In China label has reduced the selling price of many products in USA and killed inflation, the services provided by competent Indians will lower the cost of living for the elderly who need people to take care of them.

    Each time a soft drink is sold in India, Darjeeling tea should be shipped to the Americans. The Americans understand this kind of stuff: New products introduced in new markets are the aphrodisiac of the multinationals that even a Viagara cannot match. And lower product costs from less expensive manpower made possible by preferential immigration rules will also please the Americans. Look at how the H-1 visa quota has been increased as the Americans realise they need foreign labour to solve their Y2K problems. Sure, the US imposed actions on India but did they make any noise about banning H-1 professionals? No, sire, they need those folks - for now. Once the year 2001 comes along and the Y2K problem is history, the H-1 immigration quota will be reduced again since the Americans no longer need these extra bodies. Until then the instinct of self-preservation and sniff of money has forced a change in immigration laws.

    The guys up in Delhi, who make our foreign policy, must be the laughing stock of America and China. South Block keeps on fretting about silly things like moral issues and then they explode a nuclear devices only to sound apologetic and defensive. It will not surprise me if the cost of all these series of secret meetings with State Department Officials of the U. S. government amounts to more than the cost of the nuclear tests! Our government must change track and recognise that India is a market which the Americans want in on: give it to them but, like the Chinese, make them pay US$ 40 billion per year for the privilege.

     

     

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