The United States-India Relationship Council (USIRC) has raised its concerns about double-edged swords like currency monopoly and tariffs that are likely to impact the relations between the USA and India.
The USIRC has been working for strengthening the US-India economic partnership for global growth, freedom, openness, and complementarity-based growth of both the nations. Opponents want this vital partnership to derail on contentious issues like currency (US dollar) monopoly, de-dollarization, free trade agreements (FTAs) and tariffs.
Certain concerns need to be attended to strengthen this important partnership. The foremost contentious issue to which executives of both the US and India have aired views on the public forum is the US Dollar’s monopoly vis a vis de-dollarization. India has made its position clear – it is not at all keen on de-dollarization nor is it interested in weakening the USD, India has the least and easily manageable USD exposure. Supply Chain Monopoly is main issue as it is much more dangerous.
The US position is for continuing USD monopoly. Nevertheless, ‘Currency Monopoly’ being a potential fault line, the USIRC urges for review of the US position from the prism of the merit-based American dream, which is also concurrent with the Indian value system.
Unbacked US dollar monopoly is an antithesis of merit. It does not augur well, either for America, or for any of the stakeholders. This may sound provocative, but the monopoly of the USD is harmful for the US too, in the long term. There is a compelling view that USD monopoly has harmed the US and its international relations more than not.
Even the so-called benefits of USD monopoly are actually harms in the long run.
Being a global-reserve currency that facilitates international trade, finance, and investment, ought not be at the cost of long-term American interests. Just as NATO and other nations have to fight their wars; it is for the nations to fix the currency for their trading. It is not the responsibility of the US to provide currency for their trading.
The second benefit is that being a trade currency does give some economic influence to the US. But dollar-dominance could be counter-productive and unworkable too.
Observers say that the US must balance its economic influence with responsible financial management, fiscal prudence, investment in innovation, and diversification of economy. By addressing these challenges, the US would be able to avoid complacency, and maintain its economic leadership, promote fair trade, implement balanced trade policies, address deficits, protect domestic industries, become a fiscally prudent nation, manage national debt, and avoid excessive money printing.
With sound fundamentals, the US would be able to collaborate with other nations, including its natural ally, India, to maintain a stable international monetary system.
The other bone of contention is trade deficit, tariffs, free trade and related issues.
The third benefit though is seigniorage; issuing the world’s reserve currency generates revenue for the US. But perpetual printing of notes having skewed face value (compared to the printing costs) without commensurate back up reserves is dangerous for all.
If we look at the drawbacks, there is a strong view that over-reliance on the dollar’s reserve status has led to complacency, reduced competitiveness and whopping trade deficits, to the extent that America’s defence systems have become dependent on supplies from avowed enemies of America like CCP. Printing currency notes continually leads to inflation with erosion of purchasing power. USD monopoly has fostered a false sense of entitlement resulting in reduced innovation, decreased productivity and less investment in education as well as creaking infrastructure. This has also led to global resentment, potentially undermining US relations.
It is said that the ‘lazy spoiled brat syndrome’ due to USD monopoly has resulted in excessive focus on financial services, neglect of manufacturing & innovation, decline of manufacturing leading to job losses at home. Prioritizing financial interests over trade policy has led to trade deficits and economic as well as strategic imbalances.
Tariffs are also double-edged swords. Meant to protect domestic industries, by making imported goods more expensive, giving edge to own manufacturers and to generate revenue for the government and jobs for people, and to serve as a negotiating tool in international trade disputes, tariffs can lead to higher prices for consumers and resultant unrest, reduced competitiveness and also job losses in sectors that rely on imported goods.
Tariffs can escalate into trade wars, disrupting global trade flows and its fallouts. Thus, tariffs as well as free trade agreements are tools fraught with unintended consequences. Their use has to be done very judiciously and sparingly.
Tariffs need not be applied against friendly nations like India who do not pose threats of illegal immigration or hegemonic monopolisation of resources & supply chains, who have no malice towards the American nation, American economy & American dollar. India does not breed or export terrorism, and does not support IP pilferage.
Just as India and Israel are trying to be self-reliant (India talks about being ‘Atmanirbhar’ or self-reliant as national policy), nations have to be hard working to counter the challenges from globalist communist and Jihadi terrorist nexus.
The US reset to the American Dream of its founding fathers would mean ‘Be American, Buy American’, buttressed by ‘Make American’. Rather than artificial, anti-merit, and counter-productive means like unchecked tariffs and unbacked currency monopoly, strengthening the fundamentals of the economy would go a long way unhindered.
The fundamentals of the respective partner economies have to be strong for the bilateral partnership to be strong. The US and India, being two big economies, have also to be two sound economies with strong fundamentals to be able to save the free world from communist and terrorist globalists.
