India’s buy American challenge
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The ‘Buy American, Hire American’ slogan of US President Donald Trump is rapidly assuming Goebbelsian proportions. There is not a day when he doesn’t issue this ultimatum. He signed an executive order on ‘Buy American’ measures on 16 February.
Trump told his supporters during his first re-election campaign rally for 2020 in Florida, on 18 February: “And very importantly, as I was about to sign it, I said who makes the pipe? Who makes the pipe?…Simple question.”
“The lawyers put this very complex document in front. I said, who makes the pipe? They said, sir, it can be made anywhere. I said, not anymore. I put a little clause in the bottom. The pipe has to be made in the United States of America if we’re going to have (a) pipeline,” Trump thundered at the rally.
On 20 February, the ‘Buy American’ policy measures in the renewable energy sector faced their first major international legal challenge. India, the country that is now taking the sole superpower to task on this issue for further adjudication at the World Trade Organization (WTO), is also the one that was told that its own measures to promote renewable energy for grappling with human-made climate changes are inconsistent with global trade rules.
Nevertheless, India finally mustered the courage to challenge Washington on whether it can continue with its tens of billions of dollars of illegal subsidies and mandatory local content requirement that form part of the ‘Buy American’ policy menu in the energy sector. In effect, India is throwing a litmus test on whether the Trump administration can continue to trample global trade rules in its religious push for ‘Buy American’ policies.
The Narendra Modi government could have taken the dispute to its logical end immediately after coming to power in 2014. But, for inexplicable reasons, New Delhi delayed until it was legally censured by the WTO for a much smaller violation as compared to Washington’s alleged mega-illegal incentive programmes in the renewable energy sector.
In the process, India has lost the strategic leverage that is capitalized on by countries in tit-for-tat trade disputes. Little wonder that the US chose to block the Indian request for establishing a WTO dispute settlement panel against American incentives and subsidies for the renewable energy sector on 20 February saying, “India launched this dispute for political reasons”.
At a time when humankind is facing its worst existential threat due to accelerating climate change, indeed, there is an urgent need for sustained action to reduce carbon emissions.
It is important to acknowledge that climate change is a byproduct of unimpeded trade liberalization and inflexible global trade rules, according to journalist Naomi Klein. She says “trade trumps climate” in her book “This changes everything: Capitalism vs the climate” while commenting on the WTO’s ruling in trade disputes such as the feed-in-tariff spat between Canada on one side versus Japan and the European Union on the other, and India’s Jawaharlal Nehru National Solar Mission between the US and New Delhi.
Governments, including China and India, in their zealous pursuit of notching high economic growth year after year turned a blind eye to the damage that is being caused to mother earth.
Shockingly, people in China and India may not be able to breathe clean air because of enveloping pollution that is causing almost one million deaths annually in India alone, according to the journal on Preventive Medicine and the World Health Organization. “Successive governments have turned a blind eye not only to urban air pollution but also to indoor contamination caused by smoky chulhas,” says the environmental journalist Darryl D’Monte in his article ‘Every breath you take’ in The Indian Express on 20 February.
Even powerful conservatives who prided themselves as champions of war in Iraq and “open door” policies are now calling for “climate action” in the US. Despite the Trump administration’s all-out incentives and subsidies for promoting the oil industry, the Climate Leadership Council (CLC) led by powerful former US officials has circulated a detailed “carbon dividends plan” based on four pillars. Led by George Shultz and James A. Baker, among other heavyweights of the American establishment, the conservative coalition called for “an insurance policy” in which they proposed policy measures such as “a gradually increasing carbon tax”, “carbon dividends for all Americans”, “border carbon adjustments”, and “significant regulatory rollback”.
The CLC wants to tackle “carbon content of both imports and exports” through a range of incentives for American exports to countries without comparable carbon pricing systems and imports from such countries to be subjected to punitive import taxes (duties) on the carbon content of their products. “Proceeds from such fees would benefit the American people in the form of larger carbon dividends,” the sponsors argued.
Writing in the Financial Times on 12 February, the steel tycoon Lakshmi Mittal suggested to the European Union to introduce “border carbon adjustments to protect European competitiveness” in steel and other sectors. He is suggesting a tax of €40 per tonne almost on the lines of the carbon dividends plan proposed by the US grandees. In short, the US and the EU—which are historically responsible for climate change—are now toying with border adjustments and other punitive measures on imports that could well violate global trade rules.
These measures could have a “devastating effect on the exports and investments of American trading partners, especially the developing countries”, says Martin Khor, executive director of the Geneva-based South Centre, in his article ‘US protectionist border adjustment tax plan likely WTO-illegal’ in SUNS [South-North Development Monitor] on 20 February.
More important, the US, the EU and other industrialized countries are walking away from their historic obligations for complying with the Paris climate change agreement of December, 2015.
It is time that India and other developing countries came to terms with the changing architecture based on ‘Buy American’ and ‘Hire American’ policies in which they are the major losers. The need of the hour is to divorce trade and development policies from security and defence priorities. India must mobilize support of like-minded developing countries that are victims of Uncle Sam’s “my way or the high way” ultimatums.