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Insights into Editorial: Loud and clear: on India-U.S. discord on market access


Insights into Editorial: Loud and clear: on India-U.S. discord on market access


Context:

In scathing speech by U.S. Commerce Secretary Wilbur Ross in New Delhi, it is no longer possible for the government to brush under the carpet its differences with Washington.

U.S. Commerce Secretary Speaking to Indian and U.S. businesspersons, lashed out at what he called India’s unfair trade practices and “overly restrictive market access barriers”.

These comments followed a series of measures by the U.S. that have affected India.

 

U.S’s measures that affected India:

Series of measures that include:

  • A refusal to revoke or waive tariff increases made last year on steel and aluminium,
  • An ultimatum that India “zero out” oil imports from Iran by May 2 even without securing comparable alternatives, and
  • The decision to withdraw India’s GSP (Generalised System of Preferences) trade status.

 

India’s measures that affected U.S:

Tariff and Non-tariff barriers like the 50-60% duties on motorcycles and cars and 150% duties on American liquor that India imposes need a second look.

In addition, the government will need to revisit some of its decisions like data localisation requirements and new e-commerce regulations, which were declared suddenly.

While the U.S. must show some flexibility on India’s price caps on coronary stents and other medical devices.

The U.S. 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 U.S. sanctions.

Two other issues that the US side has specifically raised during the latest round of negotiations are the “treatment of Walmart after their acquisition of Flipkart”, and the problems on data localisation reportedly faced by companies such as MasterCard and Visa.

Trump administration decided to withdraw GSP benefits for Indian exports in retaliation for Indian tariffs that the U.S. deemed to be prohibitively high.

 

India-US Trade in recent past:

U.S. is India’s largest export destination, India is only the 13th largest for the U.S. due to “overly restrictive market access barriers”.

While speaking at the Trade Winds conference organised in the national capital, India is already the world’s third largest economy, and by 2030, it will become the world’s largest consumer market because of the rapid growth of the middle class.

U.S. Commerce Secretary highlighted that today, India is only the U.S.’s 13th largest export market, due to overly restrictive market access barriers.

Meanwhile, the U.S. is India’s largest export market, accounting for something like 20% of the total. There is a real imbalance.

However, The U.S. must see that average tariffs imposed by India (13.8%) are not much higher than those levied by economies such as South Korea and Brazil.

Indeed, if bilateral ties are largely driven by technology transfers, arms sales, joint exercises, and foundational agreements on defence, this amounts to a deep but one-sided security relationship, and not a robust and multifaceted strategic partnership.

 

Reactions by both sides

Both sides have played down these differences and offered reassuring data points:

India will scale up oil imports from other top producers;

The GSP withdrawal will have minimal impact on India’s economy;

The two capitals are working actively on high levels,

Most recently through the U.S.-India CEO Forum and the India-U.S. Commercial Dialogue, to ease tensions; and above all the strength of the bilateral relationship can easily withstand all these headaches.

Still, no matter how it is defined, any strategic partnership must be broad-based, with trust and cooperation present across a wide spectrum of issues and not just limited to close collaborations in the guns-and-bombs category.

 

Conclusion:

U.S. Commerce Secretary Mr. Ross repeated President Donald Trump’s accusation that India is a “tariff king”, and threatened India with “consequences” if it responded to U.S. tariffs with counter-tariffs, something New Delhi had threatened but not yet implemented in the hope of hammering out a comprehensive trade package.

Despite rounds of talks, however, a package has remained elusive, and it is time for the government to articulate the problem on its hands.

A true strategic partnership remains, at least for now, elusive between India and the U.S.

India-U.S. relations have potential to extend well beyond security, especially initiatives ranging from clean energy to innovation.

New Delhi and Washington need to make a more determined attempt to sort out issues, starting from scratch if required, with tariffs.