Indo-US trade discord

Kashmir Times. Dated: 5/11/2019 11:45:55 PM

India needs to hammer out differences with US on market access discord that is hitting Indian interests

The United States of America decision to take India out of the Favoured Nation status over differences and discord on market access to each other should act as an eye-opener for the policy planners and the BJP-led government in New Delhi. The rulers in New Delhi should not live in denial mode over these differences in view of the fact that such a move by the US can hit Indian interests not only in short time but also in the long run if these roadblocks continue in near future. Already, India is facing the problem of energy security in the region due to the threat by US to up the ante against India, if the latter did not lower the oil imports from Iran before the May 2, 2019, deadline after which the sanctions against the Persian Gulf country came into effect. It is unfortunate that time and again, the right wing party led government in New Delhi has not given a serious thought to this issue despite realization that energy security was of prime concern for Indians in view of changed geo-political scenario around the world. This is particularly important after the deadline was announced by the US for India to zero out its oil imports from Iran despite the fact that the European Union has rejected the trade sanctions deadline and urged Iran to continue to adhere to the Nuclear Agreement of 2015. Moreover, after the scathing speech of the US Commerce Secretary Wilbur Ross in New Delhi last week, it is impossible for the government to brush under the carpet its difference with Washington. His comments on what he called "India's unfair trade practices and overly restrictive market access barriers" need to be taken seriously. The series of measures initiated by the US after his speech have adversely affected Indian business interests. These include a refusal to revoke or waive tariff increases made last year on steel and aluminium, ban on oil imports from Iran and the decision to withdraw India's GSP (Generalised System of Preferences) trade status. US' accusation that India is a 'tariff king', and threatened 'consequences' if it responded to US tariffs with counter-tariffs, something New Delhi had threatened but not yet implemented in the hope of hammering out a comprehensive trade package. Despite several rounds of talks, however, a package has remained elusive, and it is time for the government to articulate the problem on its hands.
In view of growing US aggression on market access, the central government that takes office after the elections will have to urgently consider its options ahead. Clearly, the strategy of the past year, to ignore the differences in the hope that the problems would be resolved or that the US' trade war with China would occupy the Trump administration more, has not worked. New Delhi and Washington need to make a more determined attempt to sort out issues, starting from scratch if required, with tariffs. While the 50 to 60 percent duties on motorcycles and cars and 150 percent duties on American liquor that India imposes need a second look, the US must see that average tariffs imposed by India (13.8 percent) are not much higher than those levied by economies such as South Korea and Brazil. In addition, the central government will need to revisit some of its decisions like data localisation requirements and new e-commerce regulations, which were declared suddenly, while the US must show some flexibility on India's price caps on coronary stents and other medical devices. The US must understand the cultural differences over the labelling of non-vegetarian dairy products. It is unlikely that the Trump administration will temper its 'my way or the highway' approach to Iranian oil sales, and New Delhi will have to work closely with other countries to build alternative financial structures to avoid US sanctions. Where a compromise is not possible, the government should be ready to push back on unreasonable demands. Perhaps the most worrying signal from US outburst was that Washington may not be willing to meet India halfway on trade issues. Under the changed circumstances, New Delhi must prepare accordingly and find a way out to protect its trade interests.



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