Washington seems blind to the fact that in the run-up to a tightly contested
national elections, New Delhi would find it politically more expedient to
exchange blows than come to a settlement that could be criticised by the
opposition
India and the United States are squaring up for an exchange of blows on
trade issues as space for a negotiated agreement is running out. The United
States Trade Representative’s Office (USTR) has run out of patience over a
two-year dispute on medical device price controls, not least because New
Delhi suddenly walked away from a negotiated settlement.
The USTR now wants zero-tariff privileges for Indian textiles and other
imports, under the World Trade Organization’s (WTO) generalised system
of preferences, be revoked. The most obvious Indian retaliation would be to
impose tariffs on US steel and aluminium imports, something it has delayed
despite the unilateral imposition of similar tariffs on India.
Neither of these actions will have significant economic impact. The real
danger would be for this tit-for-tat to trigger an escalatory series of actions.
Of concern would be the formal dispute spreading to incorporate a whole set
of new sources of trade friction such as data localisation norms or the rules
governing e-commerce investment. Neither side is faultless in the present
economic fracas.
Much of India’s problems arise from arbitrary decisions by domestic
regulators who have little understanding of India’s multilateral trade
obligations, complicated by a political unwillingness to override these
decisions no matter how foolish they may be. Washington seems blind to the
fact that in the run-up to a tightly contested national elections, New Delhi
would find it politically more expedient to exchange blows than come to a
settlement that could be criticised by the opposition.
Trade disputes are hardly new in Indo-US relations and are common
between any two nations that have a substantial economic relationship. The
environment today is different for two reasons. One is that the Trump
administration divorces strategic and trade issues. It sees no contradiction
in having friendly strategic relations and a confrontational trade policy with
the same country.
The US is also running two separate trade policies. President Donald
Trump’s revolves around trade deficits and temporary obsessions like
Harley-Davidson motorcycles. The USTR remains concerned about policy
shifts that undermine US corporate interests
Two, India is struggling with a whole set of new norms regarding the digital
economy, ranging from data privacy to payments structures, that it has yet
to settle at home.
The Modi government had mooted the idea of putting all these issues into
one basket and working on a US-India trade pact. It is perhaps time to dust
off this idea and begin a process designed to prevent potential trade conflicts,
most of which are easily predictable.
Source: The Himalayan Times, Nepal Tuesday, 12 February 2019