Monday, November 10, 2008

Obama's most protectionist rhetoric

Barack Obama's victory with many war words but the prophet of "Yes, we can" is a one which is now matter than the before US election at least for India.

See Swaminathan S A Aiyar article in ET it may sound you against Obama’s future promise but we have to think the root causes keeping in mind the below some of key paragraphs:

“Now that the US is slumping into the worst recession since 1979, can Obama take measures to reduce the outsourcing of software and business services to India, and reduce visas to Indian software engineers? Yes, he can. 

Can he take measures to reduce the flow of direct and portfolio investment to India? Yes he can. He wants to raise the capital gains tax from 15% to 20%. That worsens the risk-reward ratio for US investors, and will make them more reluctant to invest in emerging markets like India, which are considered riskier than the US. 

Can Obama devise tax and other measures that will penalise US companies that invest abroad, in countries like India, rather than in the US? Yes, he can. 

Can Obama come out with protectionist measures to shift jobs from poor countries to the US? He not only can, he has promised to do so. 

Can he increase subsidies for and compulsory use of corn-based ethanol, measures that have caused a big spike in world food and fertiliser crisis? Yes, he can. 

Can he kill the Doha Round of the World Trade Organisation by taking a much tougher line than Bush on keeping US farm subsidies high? Yes, he can. 

Can he act against
India for building up its forex reserves, and hence keeping the rupee weaker than it would otherwise have been? Yes, he can. He has in the past voted to penalise China for doing just this. In the current financial crisis it is wise for Third World countries to keep high forex reserves, but this is not recognised by protectionists in the US. 

He has said that if only the Kashmir issue is settled, Pakistan can better concentrate on al-Qaida and the Taliban. The Indo-US nuclear deal is through. But can Obama come up with hurdles on details, like licences for dual-purpose technology? We hope not, but yes, he can. His supporters include non-proliferators who still want to punish India. 

Can he insist that India should enact a law limiting the liability of US nuclear suppliers in the event of an accident at an Indian nuclear power plant? Can he urge India to sign an international convention shifting liability from equipment suppliers to the company running a nuclear plant? Yes, he can. 

Here again, we must not exaggerate the risks. In practice,
US policy may not change much. But history shows that Indo-US relations have usually been better under Republican than Democratic presidents. Democrats are more protectionist, and tougher on nuclear non-proliferation. 

Bill Clinton was personally popular in
India, but never did anything for us except impose sanctions after Pokharan II. Bush was personally unpopular in India, yet did us yeoman service by pushing through the nuclear deal. Can Obama do anything to match that? Yes, he can, but I rather doubt that he will”.

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