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Time of India
15-05-2025
- Business
- Time of India
India's strategic trade reset with the US: Beyond tariff to critical technology
Manish Kumar Jha is a defence editor and security expert. He is the Sr. Visiting Fellow & Editorial Adviser at the United Services Institution of India. He is a fellow of Oxford University/KPF. He writes on national security, military technology, strategic affairs & policies. LESS ... MORE The talk over the new trade deal between India and the US must be seen beyond the trade and tariffs. The reduced tariffs, lesser barriers and regulations could be a potential for economies like India to leverage advanced tech, materials, and machines for a greater global supply chain resilience. In a pivotal move that could redefine India's position in the global economic and technological landscape, Prime Minister Narendra Modi and U.S. President Donald Trump are negotiating a new trade agreement. The agreement has a key element of a technology partnership. Despite the calls for a tariff, which is more in line with a reciprocal tariff, as the Trump administration calls it, it is based on the trade deficit that the US has with many countries, including India. However, the tariff reduction also means greater trade and technology, as both are trying to raise the bilateral trade from the existing (2024) $129.2 billion to $500 billion by 2030. Will it be a positive mark on the bilateral trade or a drag while it aims to bolster bilateral ties, enhance economic resilience, and supply chain alternatives? For India, it is more about breaking into some real investment in advanced technology, easing the higher investment in R&D and technology transfer, especially in defence. The recent deal with the UK has given enough indication to gauge some direction on how Trump's administration will deal with India. Recently, the US announced its first 'breakthrough deal' with Britain. It lowers average British tariffs on US goods. Still, it keeps in place the 10% base tariff on British goods, levied by Trump's administration, which hints at the major policy approach under negotiations with other major economies and trading partners. In February, India and the United States announced plans to complete the initial phase of a trade agreement by autumn 2025, to achieve bilateral trade of $500 billion by 2030. In June, Trump announced a 90-day pause on his long-planned reciprocal tariffs on global trading partners, including a 26% tariff on India, while his administration negotiates trade deals. Even after the pause, on such a pattern, a 10% base tariff remained for India and other major trading partners. Tariff Reduction: Expanding trade & Tech Worth noting that India was amongst the earliest nations to initiate a trade deal with Trump's Administration. India has proposed a significant reduction in its average tariff gap with the United States, from nearly 13% to under 4%. India's average tariff rate is 17% compared with 3.3% by the US. Agriculture, being the mainstay of India, has a tariff of around 39% on Agri imports. In electronics, US products face a 7.64 % tariff while Indian electronics get a 0.41 % tariff. This ambitious move, one of India's most extensive tariff reforms, is designed to prevent potential U.S. tariff hikes and stimulate trade. In exchange, India seeks preferential market access for key export sectors such as gems and jewellery, textiles, chemicals, and agricultural produce, along with full tariff exemptions on its exports. In the first phase, the Indian government announced to reduce duties to zero on 60% of the tariff lines, a comprehensive scale of trade, covering almost 90% of the goods from the US. What is the tariff story which also connects to the aspiration of the domestic market? The notion that high tariffs work is factually incorrect, especially in the case of developing nations. In many cases, it is only about protecting the few for the fear of competition, which only limits the growth in the long run. For example, the US has had the lowest trade tariff barriers, even if it's on a 10% basis, it will be among the lowest. The lower tariff in all economic possibilities will work for developing countries, and the next phase of the growth story must hinge on a greater global supply chain by embracing competition and technologies in all possible ways. Additionally, India has also shown its intent and greater flexibility by offering to ease/simplify export regulations for high-value U.S. goods, including aircraft, medical equipment, and cars. Further, India is also reportedly easing export regulations on several high-value US exports, including electric vehicles, hydrocarbon, devices (telecom), beverages (whiskey and wines), and chemicals (specific). However, for India, the point of leverage is far beyond the commodity export or import, but strategic areas of critical technologies such as AI, telecoms, biotech, pharmaceuticals, and semiconductors. It is about tech, talent, and innovation bases. TRUST & iCET Initiative: Technological beyond tariff The trade negotiations are largely seen from the point of goods and tariffs for market access, and removing barriers. However, such a binding agreement opens strategic areas of cooperation, accessing advanced technology for both commercial and defence. Underlining this, the White House recently announced: Central to this partnership is the launch of the U.S.-India TRUST ('Transforming the Relationship Utilising Strategic Technology') initiative. This initiative aims to catalyse government-to-government, academia, and private sector collaboration to promote the application of critical and emerging technologies in areas like defence, artificial intelligence, semiconductors, quantum computing, biotechnology, energy, and space. Drawing on PM Modi's policy roadmap on critical tech like Artificial Intelligence (AI), Advanced Computing, and Quantum, the TRUST initiative focuses on the development of a U.S.-India Roadmap on Accelerating AI Infrastructure. The TRUST framework is designed to address and enhance AI capabilities across the key sectors of the economy, including military applications in both nations. Further, Critical and Emerging Technology (iCET), launched in 2022, is opening collaboration in key sectors – from space to semiconductors, biotechnology, cybersecurity, advanced telecommunications, and clean energy. The reduced barriers will potentially advance the ongoing strategic semiconductor partnership between the US Space Force and 3rdiTech to establish a compound semiconductor fabrication plant in India to manufacture infrared, gallium nitride, and silicon carbide semiconductors that will be used in national security-relevant platforms. In another area is Advanced Materials R&D, where such trade deals can free metal and materials from high-tariff barriers, which is vital for critical military platforms from aerospace (jet engines) to marine propulsion systems to commercial sectors, healthcare, electronics, energy, and transportation. Moreover, the very quest for self-reliance in defence technologies warrants a greater flow of tech, talent, and trade. India's acquisition of the MQ-9B platforms, the possible co-production of land warfare systems, and progress on other co-production initiatives outlined in the US-India Roadmap for Defence Industrial Cooperation will further broaden industrial bases in India. The formation of the Bio-5 Biopharmaceutical Supply Chain Consortium, the US-India-ROK Technology Trilateral, is are building block for cooperation with Australia and Japan through the Quad. Aligning with Global Allies India has expressed its desire to be treated on par with top U.S. allies like Britain and Japan in sectors such as AI, biotech, and semiconductors. This alignment is crucial as both nations seek to counter common challenges, including unfair practices in export controls and overconcentration of critical supply chains. By fostering deeper ties in these strategic sectors, India aims to enhance its technological capabilities and ensure its position as a key player in the global innovation ecosystem. A Calculated Leap Forward This strategic partnership between India and the United States is not merely a trade agreement but a calculated leap toward global leadership. By reducing trade barriers, enhancing technological collaboration, and aligning with global allies, both nations are positioning themselves to address the complex challenges of the 21st century. The tariff reduction or elimination of trade barriers will deepen collaboration across key sectors – from space to semiconductors, biotechnology, cybersecurity, advanced telecommunications, and clean energy. As the world watches, India's proactive approach could serve as a model for emerging economies seeking to navigate the intricacies of global trade and technology diplomacy. On India's part, the expectation of full exemptions from tariffs on exports will be a herculean task under Trump's administration, as it came up during the early phase of negotiations between the US and the UK. However, in areas like the agriculture sector, where nearly half of India's population is dependent on farming or agriculture needs a different approach is needed. India's high tariffs are to safeguard its farmers from imports and the undue disadvantage they might face from the large subsidies in the US. The trade deal and tariff negotiation must take into account such fundamentals of the Indian economy. The India-US trade and technology partnership does represent a significant step toward building greater trade, technology, and supply chain resilience in the global economy. The trade reset, as it sounds, an alarm bell is rather an opportunity to not only strengthen its ties with the United States but also assert its role as a pivotal force in shaping the future of global trade and technological innovation. Facebook Twitter Linkedin Email Disclaimer Views expressed above are the author's own.
Time of India
05-05-2025
- Business
- Time of India
India-Japan 2025: Breaks off barriers in defence tech cooperation
Manish Kumar Jha is a defence editor and security expert. He is the Sr. Visiting Fellow & Editorial Adviser at the United Services Institution of India. He is a fellow of Oxford University/KPF. He writes on national security, military technology, strategic affairs & policies. LESS ... MORE India and Japan have been strengthening their bilateral defence ties, a partnership seen as a crucial strategic counterbalance. A new milestone in this relationship has been marked with the recent India-Japan agreement on the 'Unicorn Masts' technology, which would be the first case of co-production of defence equipment between India and Japan. With the gradual breaking of constitutional barriers, it has the potential to open the scope of collaboration from global jet programmes to submarines with India. With Prime Minister Modi's impending visit to Japan this year, it is important to assess the overall bilateral economic and security cooperation. The bilateral relationship has evolved significantly over the past two decades, encompassing trade, investment, strategic cooperation, and infrastructure development. Yet, while ties are warm and promising in many areas, there is an underwhelming partnership in some critical areas, including hi-tech and defence. In the wake of Prime Minister Modi's impending visit to Japan and the India-Japan summit, which is scheduled to take place before the end of the year, it is important to assess the overall bilateral economic and security cooperation. Bilateral trade is still somewhat achieving its potential. Despite the 2011 Comprehensive Economic Partnership Agreement (CEPA), which aimed to eliminate tariffs on over 90% of goods, businesses on both sides cite regulatory bottlenecks, lack of awareness, and logistical challenges as barriers to greater trade. However, India and Japan have taken steps to strengthen their bilateral defence ties, a partnership seen as a crucial strategic counterbalance to China's growing influence in the Indo-Pacific region. A new milestone in this relationship has been marked with the recent India-Japan agreement on the 'Unicorn Masts' technology. This development is not only a testament to the expanding defence cooperation between the two nations but also holds significant geopolitical implications. The Indian Navy will induct these advanced systems with additional elements, which are co-developed by Bharat Electronics Limited (BEL) in India with Japanese collaboration. When implemented, this would be the first case of co-development / co-production of Defence Equipment between India and Japan. The antenna, also known as Nora-50, was developed by Japan's NEC Corporation, Sampa Kogyo K.K., and Yokohama Rubber Co. Limited. It is currently installed on the Mogami-class frigates of the Japan Maritime Self-Defence Forces (JMSDF) mast. The Unicorn Masts Technology and its importance The 'Unicorn Masts' agreement between India and Japan focuses on the transfer of advanced radar systems for surveillance purposes. These radar systems, developed by Japan's Mitsubishi Electric, are known for their ability to detect even the most elusive objects, such as stealth aircraft, making them a critical asset in modern warfare. India's Defence Research and Development Organisation (DRDO) will collaborate with Japan's leading defence technology firms to integrate these radars into India's defence systems. The 'Unicorn Masts' is an advanced system of clusters of antennas, which work on a single support system—a single radar dome, instead of spreading across the ships. This adds to the warships' stealth capability as it cuts the visibility of multiple points of radar cross-section. Such an arrangement is vital for maritime missions, especially in the contested zone of conflict. It is important to note that India is the only country, after the Philippines, to receive defence equipment of such grade. While the agreement is limited to the advanced radar, it underscores the gradual opening of Japan's pacifist outlook and willingness to participate in the defence technology supply chain with key friends and allies in the region. This agreement highlights Japan's growing willingness to share advanced military technology with India as both countries face rising tensions with China in the region. Expanding military ties between India and Japan This agreement forms part of a broader shift towards deepening military cooperation between India and Japan. Both nations have recognised the importance of a unified approach to counter China's assertive military strategies in the Indo-Pacific. Japan has long been concerned about China's increasing naval and military activities in the East China Sea and South China Sea, while India has been focused on securing its maritime interests in the Indian Ocean. The partnership between the two nations, particularly in defence cooperation, helps to reinforce stability and security in the Indo-Pacific region. As part of this expanding cooperation, India and Japan have also been working on joint military exercises and defence technologies, with a special focus on anti-submarine warfare (ASW), maritime security, and fighter jet collaboration. The strategic importance of these initiatives is underscored by China's growing military capabilities and its aggressive stance on territorial disputes, particularly in the South China Sea and along the Himalayan borders. In addition to the agreement with Japan, India has also taken steps to enhance defence cooperation with other nations such as the US and France. By expanding its options for defence-related procurements to include technologically advanced and like-minded nations, India is on the path to greater strategic autonomy as well as bargaining power in the international defence market. Japan's fighter jet and submarine exports to India The growing India-Japan defence relationship is not just limited to radar systems. Japan is also actively exploring opportunities to open its doors to foreign collaboration for its advanced military collaboration, including fighter jets and submarines. In fact, last year on March 15, in a sweeping decision, Japan announced the easing of its stance on the transfer of military equipment to other friendly nations, revising the implementation guidelines for its three principles on the transfer of defence equipment and technology. Such a move becomes important so that it will be able to export the aircraft to third countries, keeping the multinational Global Combat Aircraft Programme (GCAP) with Italy and the UK on track. Additionally, Japan is also expanding its naval exports for a joint development of frigates with the Australian Navy. Moreover, Japan has established a government entity with a private company for the sale of its Mogami-class destroyers to Australia. However, the agreement is not a binding act but only allows the government to ease the stringent restrictions and regulations on a case-by-case basis, with discussion with various stakeholders. The move is meant to significantly impact the GCAP, facilitating smoother international collaboration in defence technology. Interestingly, both countries are looking at next-generation combat jet programs to address the need for air superiority with the radical shift in technological advancement. While Japan has GCAP with Italy and the UK as key partners, India is moving ahead with its AMCA–Advanced Medium Combat Aircraft–– program on its own. However, such opportunities also open the scope of collaboration with India's close friends and strategic partners like Japan. The new emerging technology in aerospace needs collaboration in areas ranging from advanced materials to aero-structural. At the same time, a look at China's introduction of the J-36 and J-50 fighters indicates a significant advancement in its military aviation capabilities and aims to take a wide leap in warfare. For example, China's J-36, created by Chengdu Aircraft Corporation, has already pitched a stealth aircraft with a tailless delta wing design with three engines and high-speed performance. While it is not confirmed technically, the J-36 is often compared with the US's stealth F-35. Moreover, China's J-50 with a twin-engine configuration promises to be a sixth-generation combat aircraft, if not equal, then close to the capability of the world's most advanced Lockheed Martin's F-22. In addition to fighter jets, India could leverage Japan's cutting-edge submarines, particularly its Soryu-class submarines, which are among the most advanced in the world. As in the case of Soryu-class submarines, a 4200-ton sub, known to be the best non-nuclear submarine in the world, is seemingly quiet and has longer endurance than any equivalent sub, like the French submarine Scorpene and the Type 214 of Germany. Upgraded, it is the only submarine in the world to use a lithium-ion battery propulsion system. Way back, India's then defence minister Manohar Parrikar, asked Japan to participate in the P-75 (I)submarine programme. These submarines are known for their stealth features, long-range strike capabilities, and advanced propulsion systems. However, Japan opted out. Constitutional's matter However, Japan did not participate in India's submarine programme like the ongoing P-75 (India). One of the reasons is the complex defence procedure, which also requires a good deal of technology transfer. Japan's restrictions on sharing advanced defence technology come out of its constitution –Article 9- which limits its military to self-defence and a policy to limit transfers of military equipment and technology and ban all exports of lethal weapons. While Article 9, Paragraph 1, has been interpreted to allow Japan to maintain a self-defence force and engage in certain international activities, it has historically limited Japan's ability to export arms. Further, Article 9, Paragraph 2 prohibits the maintenance of a war potential, including an army, navy, or air force. However, in a radical shift, in 2014, under Prime Minister Shinzo Abe, Japan's policy on arms exports shifted, leading to the gradual easing of military export (low technologies) in addressing the security threat from China and North Korea. No doubt that China's military buildup, including the development of advanced fighter jets, warships, and nuclear-powered submarines, has prompted India and Japan to explore deeper security cooperation. Both countries are also members of the Quadrilateral Security Dialogue (Quad), a strategic forum comprising the United States, Japan, India, and Australia, which aims to promote a free and open Indo-Pacific region. India, in turn, has been seeking to diversify its defence imports to reduce its dependency on any one country. The cooperation in high-tech areas of fighter jets and submarines will allow India to modernise its military capabilities as Japan gains in scaling up its military industrial capability. A geopolitical turning point The India-Japan defence cooperation, marked by agreements such as the Unicorn Masts technology transfer and joint defence manufacturing projects, is a clear signal of both countries' intent to bolster their military capabilities in the face of common security challenges. As China continues to assert its influence across the Indo-Pacific, the importance of strengthening ties with Japan has never been more apparent for India. Furthermore, Japan's growing willingness to share defence technology with India signals a shift in its post-war pacifist stance. The bilateral relationship between India and Japan is not just a response to China's growing military assertiveness but also a reflection of a broader, evolving security architecture in the Indo-Pacific region. Even in the case of submarines, while it did not take off, Japan's willingness to export such advanced military technologies makes a pivotal shift in its post-World War II defence policy, which has traditionally been more restrictive. The Indo-Pacific region may witness a new balance of power, one where India and Japan, backed by their respective military advancements, serve as key players in safeguarding peace and stability against the rising tide of Chinese dominance. With security and economic concerns, it is not late that Japan looks at greater military industrial collaboration, especially in fighter jet and submarine in the wake of rapidly changing dynamics in the region. Facebook Twitter Linkedin Email Disclaimer Views expressed above are the author's own.
