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India-US trade bumps: Solution unlikely before elections

NEW DELHI: India and US are bracing for a May 2 deadline after which the US is likely to remove India from GSP (general system of preferences) benefits, highlighting the fact that a growing strategic relationship cannot protect a mistrust-laden trade and economic relationship.

While Indian diplomats are trying to get a hostile USTR to wait out the Indian elections, US officials have indicated that India could take the heat off itself if New Delhi makes a unilateral concession, say on pork imports from the US or on Harley-Davidson motorcycles.

Senior Indian officials here maintain that the US is being unreasonable and its tactics need to be challenged. “Life will go on without the GSP, we will continue to trade and remain as welcoming of foreign investment.”

Both sides agree that Prime Minister Narendra Modi could have announced a concession on Harley-Davidson motorbikes when he spoke to Trump. After Trump threw a public fit on this, the Indian government did offer zero tariffs on the controversial motorbikes. But by then, Harley-Davidson had declared it would get out of the US, so the US side was no longer interested.

But Trump remains stuck on the issue as his remarks of last week indicate. “We have a case where a certain country, India, is charging us… what great country, great friend, Prime Minister (Narendra) Modi- charging us over 100 per cent for many things”. Asking his officials to fix it, he went on to say, “Will you please work on them? It’s the craziest thing. It’s stupid trade. We have so much stupid trade.”

India says it has offered a “very good” package to the US in the past few months. India simplified the certification procedure for dairy imports (the US gives animal feed to its cows which is unacceptable to Indians.) India agreed to grant market access to alfalfa hay, cherries, and pork. On the thorny issues of medical devices, India agreed to a “trade margin approach” but requested the US to wait until after the elections. New Delhi offered what is called a “mutual recognition agreement” on telecom testing.

But the Indian offer found no traction with the USTR. Part of the problem said sources who deal with the issue is that negotiations from the US side are conducted mainly by lawyers, who are looking for conclusive “wins”. India is looking for compromise. In recent days, therefore, more and more Indian negotiators say India will live with a withdrawal of GSP, because what was on offer by India is in excess of what New Delhi receives in GSP benefits.

Until June, if the US has to accept a deal with India, it would have to be on the current package. Any other “concessions” or agreements would have to wait until the new government comes in. But the US’ deadline expires long before that.

Indian officials bristle at being labeled a “tariff king”. They point to the “World Tariff Profiles 2018” which lists some of the highest tariffs by countries, where India at 150 percent is eclipsed by Japan at 736 percent, S. Korea at 807 percent and the US at 350 percent. Speaking to TOI, senior sources said, “the trade-weighted average of MFN applied tariff for India at 7.6 percent is moderate compared to Korea and Brazil among others.” They point to India’s development imperatives, the importance of balancing imports with developing its own manufacturing capacity.

Separately, the Indian government believes that the Trump administration wants to make an “example” of India, particularly if the US and China do actually come to a trade deal in the coming weeks. India is not unique of course. The US is currently embroiled in trade flare-ups with the EU, China, Japan, among a host of other countries. That’s why India’s protestations that it has reduced the trade deficit by as much as $4 billion in 2017-18 cuts little ice in Washington.

News credit : Indiatimes