A Tale of Two Visits: What the Modi and Blinken Trips Mean for U.S. Economic Policy

Photo: LEAH MILLIS/POOL/AFP via Getty Images
Introduction
The U.S. foreign policy world has been preoccupied with two major diplomatic events in the past week: U.S. secretary of state Antony Blinken’s historical visit to Beijing, as onlookers grow increasingly worried about the spiraling state of U.S.-China relations, and Indian prime minister Narendra Modi’s state visit to Washington. The two trips are intertwined when it comes to their meaning regarding greater U.S. foreign policy. Despite the evident limitations of the U.S.-India partnership, highlighted by Delhi’s stance on the Russia-Ukraine conflict, Washington is aware of the importance of the subcontinent for its Indo-Pacific strategy. Blinken’s visit to China and Modi’s visit to the United States have displayed India’s growing relevance to the Biden administration’s policy of conflating economic prosperity and national security.
Blinken in Beijing
Blinken’s visit represents an encouraging symbol in itself—at least both powers are speaking to each other, especially after this February’s reconnaissance balloon incident. Likewise, despite Blinken’s muted arrival party, the secretary of state was able to meet with the most important Chinese government interlocutors: his counterpart, Chinese foreign minister Qin Gang; director of the Office of the Foreign Affairs Commission Wang Yi; and Xi Jinping. That both sides agreed to continue to talk is another positive sign, given the low bar set for Sino-American diplomatic relations.
And yet the backdrop of the conversations highlights failures in that vein. Notably, the secretary of state did not convince Beijing to resume military-to-military communications. On the economic front, while Secretary Blinken was clear in his intention to “disabuse” his hosts that the United States aimed to contain China, they seemed hardly receptive to the message. Press release readouts after Blinken’s meeting with Wang Yi show that the Communist Party of China (CCP) foreign affairs director decried how Washington is “suppressing China’s scientific and technological advances” through “illegal unilateral sanctions.” These remarks are overblown and aim to portray the United States as the destabilizing power responsible for the escalation of hostilities against a more mature China. Nevertheless, they are founded on an articulated, key policy shift in Washington—that the U.S. government, recognizing China’s doctrine of civil-military fusion, has walked away from its moving target policy of letting the People’s Republic of China (PRC) access key technologies a few generations behind the United States, replacing it with a firmer ceiling above which Chinese capabilities cannot develop. That was, of course, crystallized in the October 7 controls on advanced semiconductors and the subsequent deals with Japan and the Netherlands to curb China’s chip capabilities. However, the new policy is manifesting itself in other areas with broad implications: guardrails from the CHIPS and Science Act, for instance, or an impending outbound investment screening mechanism.
Blinken’s visit is at best a stabilization exercise. But it does not mark, of course, a reversal of current trends: the United States will likely continue to promulgate ways to hinder China’s access to advanced technologies benefitting its security apparatus, which will remain a sore point between the two nations. The United States’ conflation of economic prosperity and national security will also deny revenue to U.S. companies. CSIS has previously found that some firms affected by the United States’ new semiconductor export controls policy are already facing drastic revenue decreases. For instance, Lam and Applied Materials, which were both affected by the October 7 rules, anticipate a 2023 revenue drop of $2.5 billion and $550 million respectively.
These losses undermine the United States’ national security imperative of staying ahead of countries of concern, chief among them China. While that imperative may include controlling these countries’ access to key technologies, it also entails obtaining the means to ramp up efforts in research and development as well as manufacturing in key sectors. Sound immigration policy to attract workers is essential to these efforts. Another critical aspect is to make up for lost revenue and talent, resulting from the United States’ recent economic curbs toward China, by taking these investments elsewhere. Modi’s recent visit highlights how, despite Blinken’s engagement with Chinese officials, Washington’s diversification strategy has already begun in earnest.
Modi in Washington
The U.S.-India economic relationship has sometimes crossed into adversarial territory. Delhi is an infamously difficult World Trade Organization (WTO) member, blocking many decisions it has deemed against its interests, but rarely contributing to constructive debate. Modi’s visit itself has highlighted obstacles in the bilateral U.S.-India trade relationship. A day before the official visit, the leaders of the Senate Finance Committee pushed the White House to press Modi on trade barriers impacting U.S. exporters. Committee Chair Ron Wyden (D-OR) and ranking member Mike Crapo (R-ID) wrote about especially high tariffs on agricultural goods and other problems raised by U.S. farmers, as well as barriers on manufacturing and services. The two lawmakers contended that the U.S.-India Trade Policy Forum and the Indo-Pacific Economic Framework for Prosperity did not succeed in addressing these issues with Delhi sufficiently.
Despite these tensions, Biden and Modi delivered some new signs that the U.S.-India economic agenda is entering a new era of partnership. Aside from their arrangement to lay six WTO disputes to rest, they announced sweeping agreements on semiconductors, critical minerals, and technology. The two leaders began a series of chip deals to take advantage of India’s subsidy programs in the sector. Micron Technology is currently investing over $800 million toward a chip assembly and testing facility in India, Applied Materials is set to announce a new center for chip innovation and commercialization, and Lam Research is gearing up a training program for 60,000 Indian engineers. The private sector’s announcement comes after a memorandum of understanding Commerce Secretary Gina Raimondo and Commerce and Industry Minister Piyush Goyal signed last March on semiconductor supply chain and innovation partnership. India, in turn, is planning around $2 billion in projects located in the United States, such as a solar manufacturing facility in Colorado, steel plant in Ohio, and optic fiber facility in South Carolina.
In addition to ramping up investments, the two nations have taken steps to facilitate workers’ movements: the Biden administration made it easier for Indians to live and work in the United States by letting a number of them (along with foreign workers of other nationalities) renew their H-1B visas as part of a State Department pilot program. The two governments’ research arms also agreed to enter a partnership. The U.S. National Science Foundation and India’s Ministry of Electronics and Information Technology agreed to allocate “funding for joint projects in applied research areas such as semiconductors, next generation communication, cyber security, sustainability and green technologies and intelligent transportation systems.” Their joint statement emphasizes cooperation on quantum technologies such as the “Indo-U.S. Quantum Coordination Mechanism to facilitate collaboration among industry, academia, and government, and our work toward a comprehensive Quantum Information Science and Technology agreement.”
The recent Biden-Modi flurry of deals is facilitated by the fact the United States’ interest in diversifying away from China, and trip its technological advances, is reciprocated. Modi is actively seeking to raise India’s status as a potential manufacturing leader, and the country’s ties with China continue to be strained through clashes along its 2,100 mile-long border.
Conclusion
In the lead-up to Modi’s visit to Washington, experts have argued that Washington views India through rose-colored glasses. There is solid evidence to support the claim: Delhi’s policy of nonalignment makes it an unreliable ally for Western nations. Modi’s economic success story also masks deep structural issues that will continue to hinder India’s growth. And, of course, the Modi government’s track record of democratic backsliding and human rights abuses stands against principles championed by the U.S. foreign policy world. Despite Blinken’s visit to Beijing, Washington’s open arms embrace of Modi shows that the United States expects its rivalry with China to keep on rising. The Biden administration is ready to set aside ideological differences to promote a foreign policy that will soften the blow of sacrificing economic opportunities for the sake of national security.
Thibault Denamiel is a research associate with the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. William Reinsch holds the Scholl Chair in International Business at CSIS.
