Foreign Policy Watch: India-United States

[op-ed snap] Loud and clearMains Onlyop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : GPS

Mains level : India US trade ties are needed to be normalised by taking prudent and swift measures.


CONTEXT

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

Tensed situation

1. The accusation of restrictive barriers – Speaking to Indian and U.S. businesspersons, Mr. Ross lashed out at what he called India’s unfair trade practices and “overly restrictive market access barriers”.

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

2.Harsh measures – These 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.

3. Labeling  India as Tariff king – 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.

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

Need for strategic action

Clearly, the strategy of the past year, to ignore the differences in the hope that the problems would be resolved or that the U.S.’s trade war with China would occupy the Trump administration more, has not worked.

1.Working on tariffs –

  • New Delhi and Washington need to make a more determined attempt to sort out issues, starting from scratch if required, with tariffs.
  • While the 50-60% duties on motorcycles and cars and 150% duties on American liquor that India imposes need a second look, 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.

2.E-commerce regulation and medical devices – 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.

3.Labelling of non-vegetarian dairy products – The U.S. must understand the cultural differences over the labelling of non-vegetarian dairy products.

Conclusion

Building alternative financial Structures – 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.

Push back on unreasonable demands – Where a compromise is not possible, the government should be ready to push back on unreasonable demands.

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