With just weeks to go, the search for the 45th President of the United States is getting increasingly tighter and fractious. 'India Global Business' evaluates the strengths and weaknesses of the two main candidates - Donald Trump and Hilary Clinton - to see what India has in store under a new US President.
Traditionally, the 50 states vote either for the Republican or Democrat candidate largely on a set pattern based on the two parties' take on a host of issues that confront the world's most powerful country. This time around, the challenge posed by multi-billionaire businessman Donald Trump - the outsider - who first confounded everyone when he became the Republican candidate and has continued to befuddle his critics and political experts alike with his strong campaign, has added much spice to the election. Trump does not have a political legacy and lacks experience in fighting electoral battles. Yet, he has used his position as a rank outsider to question the prevailing political discourse and funnel the disenchantment among the people against the political “elites” as a whole.
Pitted against a seasoned Hillary Clinton - a former First Lady and Secretary of State - the cacophony surrounding the campaign trail has often bordered on the bizarre. Even though it belongs to the other end of the planet, India has a lot at stake in the November 8 elections. The country enjoys an upper hand in bilateral trade and the growing proximity between the two nations since 2000 has helped India tackle some of its problems, including managing its troublesome neighbours China and Pakistan. The US can do much more but India must first find out where the two stand on issues that impact its interests.
Indo-US trade: Who can take it to next level
In terms of economy and trade, US plays a critical role for India. Any major step that alters the scenario in the States will have a significant impact in India. The US is the second-largest trade partner to India, next only to China, and bilateral trade between the two countries was $96.7 billion in 2013, up over 400 per cent from $23.9 billion in 2003. Of this, US exports to India were $35.7 billion and imports were $61 billion, producing a bilateral trade deficit of $25.4 billion in 2013 that itself grew from a deficit of $6.3 billion in 2003.
The US stock of foreign direct investment (FDI) in India has also increased - over 600 per cent since 2003 - from $4.8 billion in to $28.4 billion in 2012. And while Indian investment in the US has experienced 1,400 per cent growth, this was on a low base of $350 million in 2002 and was only $5.2 billion in 2012.
An important aspect of this two-way trade is in services, which grew 600 per cent since 2003, from $5.8 billion to $32.5 billion in 2013. This includes an increase in India's services exports to the US of over 900 per cent since 2003 - from $2 billion to over $19 billion in 2013 - and growth in US service exports to India of over 350 per cent from $3.7 billion in 2003 to almost $13.5 billion in 2013. Even though the US enjoys a services trade surplus with the rest of the world, with India its services trade deficit has been growing since 2006.
It is this imbalance in trade both in goods and services that has featured on numerous occasions during the campaign trail of the two candidates. There is a not-so-insignificant chunk of America's population that feels aggrieved by job losses through outsourcing. India and China are the main culprits in popular perception. Trump's campaign has often focused on the bilateral trade mismatch and his attacks on many previous administration's free trade agreements (FTAs) have found support with the traditional American voter.
"People are tired. They want to have strength. They don′t want to have trade deals where China has got a trade deficit of $505 billion a year; where we have trade deficits, massive trade deficits with Mexico, with Japan, with Vietnam, with India, with everybody, folks, with everybody," Trump had said at a crowded election rally in Atlanta, Georgia in June. “I mean, practically every country in the world when they do business with the US, it′s called let′s rip them off. It′s like we′re all the big, bad dummies. Those days are over if I win. Those days are over. They're over.”
It is still unclear how much or what exactly he will do should he become the next US President but based on the evidence of his campaign, his victory will not enthuse the average Indian investor or businessman. Despite the progress made in the last 10 years, there are significant opportunities for India and the US to deepen their bilateral trade and investment relationship. The growth in the last decade has been on a low base and seen in context with other countries, Indo-US ties do not look that impressive. America's goods trade with China, a country with a comparable population, was over $560 billion in 2013 - almost nine times its trade with India while with South Korea, a country whose GDP is 60 per cent that of India's, it had a similar level of goods trade in 2013.
It is no wonder that Clinton is a more favoured candidate for those who mean business in India. On September 27, the day of the first Presidential debate, the Bombay Stock Exchange (BSE) registered an initial spurt enthused by Clinton drawing first blood against Trump. The Democrat candidate is a known entity in India, has visited the country many times and is generally pro-liberalisation. She also has the unequivocal backing of the small but, in some cases, powerful Indian American lobby that is also expected to have a significant presence in any future Democrat administration. There is little ambiguity in the minds of investors she would be better for Indo-US trade ties.
“She helped lay the foundation to deepen the relationship between President Obama and Prime Minister Modi, to get an outcome at the Paris negotiations, and the ambitious clean energy agenda India has set,” says John Podesta, chairman of Clinton's campaign committee. “She will take relations with India to a new level and better economic and strategic ties will anchor the US in the region.”
Next President & impact on H1-B visas
The most contentious of all issues and one which has particular relevance to India in this Presidential elections is that of reforms in issuing non-immigrant H1-B visas for professionals in the US. Every year, the country issues 65,000 such visas and India's $146-billion IT industry is a major beneficiary of it. There has been a raging debate for reforms on issuing these visas that has divided the country down the middle.
While one section which includes Hillary Clinton wants to raise the number of visas every year by three times, citing the benefits of professionals coming in from around the world and contributing to the US economy, the other section that has Trump as the ring-master severely opposes it. The Republican candidate has repeatedly accused countries like India, China, Mexico, Philippines and Vietnam for stealing jobs from the US, playing to the underlying discomfort with outsourcing of a section of the US population.
“The influx of foreign workers holds down salaries, keeps unemployment high, and makes it difficult for poor and working class Americans - including immigrants themselves and their children - to earn a middle class wage,” says Trump's official campaign website on his immigration plan in August 2015. “We need companies to hire from the domestic pool of unemployed. Petitions for workers should be mailed to the unemployment office not USCIS [US Citizenship and Immigration Services].”
Some of the assertions cannot be simply brushed under the carpet as protectionism. Skilled professionals in the US have often alleged that companies have used H1-B visas to bring skilled but cheap labour from abroad even when such professionals were available. Trump has harped on this issue promising to raise the prevailing wage for H1-B visa professionals and forcing companies to look for talent outside only if they do not get it in US. As the campaign has unfolded and the emotive issue has taken centrestage, even Hillary Clinton has felt the pressure and had to sound conciliatory on a few occasions.
In July, Clinton lashed out at replacement of US IT workers with H1-B visa workers, referring to workers at Disney where US citizens had to ironically train their foreign replacements as part of their severance package.
“The many stories of people training their replacements from some foreign country are heartbreaking, and it is obviously a cost-cutting measure to be able to pay people less than what you would pay an American worker,” she said. “It's really hard when you are the one who has lost the job, when you are at Disney in Orlando and you are told to train your successors.”
The merits of a more liberalised visa regime are also similarly loaded. Jayshree Sengupta, senior fellow at Observer Research Foundation, says the truth is the average American has greatly benefited from trade with China and outsourcing services from India have helped save Americans millions of dollars.
“Americans would have to pay much more for services currently outsourced to India compared to what they would pay if they were to be rendered at home by Americans, simply because wages are much lower in India,” she says. “Similarly, China's supply of cheap goods to US has kept its economy afloat and Americans have been able to enjoy a high standard of living and low inflation.”
As is his nature, Trump has also flip-flopped on the topic more than once. During the Republican debate in March, Trump admitted he was changing his stance on the visa issue and presented a starkly different view to what was posted on his campaign website in August 2015 (quoted above).
People are tired. They want to have strength. They don't want to have trade deals where China has got a trade deficit of $505 billion a year; where we have trade deficits, massive trade deficits with Mexico, with Japan, with Vietnam, with India, with everybody, folks, with everybody.-Donald Trump, Candidate for President of the United States
He said: “We need highly skilled people in this country, and if we can't do it, we'll get them in. But, and we do need in Silicon Valley, we absolutely have to have. So, we do need highly skilled, and one of the biggest problems we have is people go to the best colleges.
“They'll go to Harvard, they'll go to Stanford, they'll go to Wharton, as soon as they're finished they'll get shoved out. They want to stay in this country. They want to stay here desperately, they're not able to stay here. For that purpose, we absolutely have to be able to keep the brain power in this country.”
Yet not enough new jobs are being created in the US and the problem is very real. In August, only 155,000 fresh non-farm jobs were created against an expected 180,000. In May, the number of jobs created had plummeted to an abysmal 24,000. The unemployment rate in US is currently stable at 4.9 per cent but if discouraged workers and those who only have part time jobs are included then it swells to 9.7 per cent. The issue's electoral potential is obvious.
"Hillary Clinton is a known entity. She has had a long association with India both as First Lady and then as Secretary of State. She has great empathy for India′s interests,” says Shashi Tharoor, two-time member of Parliament and a former international civil servant.
“On the other, Donald Trump is an unknown entity whose random statements may not turn out to be an accurate guide to the policies he will actually pursue."
Any move, howsoever diluted, that puts curbs on the existing visa regime will be detrimental to the interests of India. In 2013, US government data showed Indian citizens accounted for nearly two-thirds of all H1-B visas issued during the year. The large number of people employed overseas also makes India one of the top remittance receiving country in the world. In 2012, remittances to India stood at $70.39 billion and represented 4 per cent of the country's GDP while non-resident Indians (NRIs) in the United States sent nearly $11 billion in remittances in 2012 that was second only to remittances from the United Arab Emirates (UAE).
The US administration's decision to expand or reduce the number of temporary visas will directly affect the mood in the corporate offices of Infosys, Wipro, TCS and countless other IT firms in Bengaluru and Hyderabad. The US accounts for 60 per cent of India's software exports.
With Clinton favouring an increase in the number of visas and Trump almost certain to at least attempt at bringing that number down, it is clear which side India is batting for on this count.
Terrorism and regional security
India's vulnerability with its neighbours in Asia and its status as a preferred target for global terrorism means the merits or demerits of Clinton and Trump cannot only be decided by economic or trade related parameters. The US holds a critical place and has invested much in the South Asian region, both by waging a war against terrorism where it utilised Pakistan's territory against Islamic radicals in Afghanistan, and its increasing proximity to India with which it has robust economic ties. At the same time, it is aware of China's growing superpower ambitions and nervous about the dragon's aggressiveness in South China Sea.
The two candidates present a study in contrast on these issues. Clinton is often seen as a hawk who is very suspicious about China's ulterior motives and wants to counter it in no uncertain manner. As a product of the established political system, she is in support of America's various alliances many of whom are in direct conflict with China on the contentious South China Sea.
In the case of Pakistan and India, the Democratic position is more diplomatic. Only recently, Clinton has voiced her concerns on Islamic radicals getting access to Pakistan's nuclear weapons and using them for terrorism worldwide. At the same time, US military and civilian aid to Pakistan in 2016 would be less than $1 billion, the lowest since at least 2007 and a far cry from the $ 3.5 billion in 2011.
Yet, it does not really mean Clinton will put sanctions on Pakistan or go the whole hog and call it a terror state. Just three days after the terrorist attack in Uri that led to the death of 18 Indian soldiers, US Secretary of State John Kerry met a delegation in Pakistan and issued a joint statement that “recognised the centrality of the US-Pakistan bilateral security partnership to their overall bilateral relationship”. The timing could not have been more off target.
Trump on the other hand is more critical of radical Islam, which he considers is the root cause of global terrorism and he may be more inclined towards taking drastic steps on Pakistan. He has reiterated his commitment to isolationism - making allies pay, stepping away from policing the world, and moving the US military out of regions he doesn't think are important. Should he implement that, the fallout in Asia, where America has much less at stake and allies have less money to pay, could be immediate. At the same time he is also aware of the threat of Pakistan's nuclear weapons getting into the hands of terrorists but unlike Clinton he may actually do something about it.
“The single biggest problem we have is countries with nuclear weapons. And it's not only a country, you have nine countries right now with nuclear weapons. But Pakistan is semi-unstable. We don't want to see total instability. We have a little bit of a good relationship. I think I'd try and keep it,” said Trump on campaign trail in April this year. “We give them money and we help them out, but if we don't, I think that would go on the other side of the ledger and that could really be a disaster. At the same time, if you look at India and some of the others, maybe they'll be helping us out, because we're going to look at it. We have many, many countries that we give a lot of money to and we get absolutely nothing in return and that's going to stop fast.”
Trump is more ambivalent on China, berating them for job losses in the economy but appears less determined to help allies like Japan in its fight in the South China Sea. While he has admitted there are serious differences between the US and China, he has maintained the two countries are not destined to be adversaries and a common ground could be sought on shared interests. Clinton is somebody China clearly fears more.
“Beijing dreads the thought of her in the White House,” says Sean King, senior vice-president with consulting firm Park Strategies.
On more tangible aspects, there may not be much impact of the elections on Indo-US defence ties. Since 2010, India has been one of the largest importers of arms and ammunition globally and the US is its second-largest supplier. Between fiscal 2013 and 2015, US supplied weapons worth $4.4 billion to India. As the conflicts in the South Asian region escalate, India's demand for weapons would only increase and the US will be more than happy to supply them. More business means better relationships, at least in the short term.
With the world staring at multiple conflicts in all directions, it is the strategic vision of Trump and Clinton that will decide their usefulness for India. Clinton's background makes her more palatable to politicians around the world and promises stability in policy essential for long-term relationships. Trump's maverick and at times inconsistent views bring an element of uncertainty and surprise to the table. It may not always be a bad thing.
Their contrasting views on many issues and ambivalence or clarity on some others means India stands to both gain and lose in either of their tenures.
How the US Electoral College works
The US electoral college consists of 538 electors-a sum total of 435 Representatives, 100 Senators and 3 electors.
The winning candidate needs the support of a majority or more than 270 electors to win the presidential election.
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Every four years on a Tuesday following the first Monday of November-8th November this year, voters poll between themselves in all the 50 states in US to vote for the electors in the states. In 48 of the states, any candidate who wins majority of the votes in a state gets all the state's electoral votes. In a state like New York for example that has 29 electors, a candidate who wins a majority of say 15 also gets the remaining 14 that he/she has actually not one. This ambiguity has in the past led to four instances when a candidate who wins the popular vote does not actually end up being the President. The most recent such example was in 2000 when Republican George W Bush edged out Democrat candidate Al Gore despite losing the popular vote. These electors who are part of the electoral college in turn vote for the President and Vice President on Monday following the second Wednesday of December-19th December this year. The sealed votes will be opened and read by the President of the Senate on January 6 and the winner will be sworn into office on January 20.
What Trump and Hillary need to do to get into the White House
As mentioned above, they need the backing of at least 270 or more electors to win the election. In every election a majority of the states are firmly in the corner of one or the other candidate (blue for Democrat, red for Republican) much before the actual voting happens. The remaining referred to as the purple or swing states that have historically displayed the propensity to swing this way or the other.
Psephologists say this year there are at least 10 such states that would be key to winning or losing the elections.
These states that include Florida, Pennysylvania, Arizona and Colorado and account for 136 of the total 538 electors in the electoral college. If the other states vote as expected, Clinton leads Trump 226 to 154 electoral votes. Trump needs the purple states to overwhelmingly turn red on November 8 while Clinton has to ensure that does not happen.
Trump and Clinton, who is better for India
Donald Trump, the Republican candidate, is a rank outsider in the US political circles and his brazen straight talk on issues that have sometimes bordered on the ridiculous, is one of the reasons for his popularity. Democrat Hillary Clinton is a more amenable known entity for India and represents status quo on policies and strategies. While the former may bring in unforeseen variables to the table, Clinton is expected to stick to stated positions on Indo-US ties.