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Home / Opinion / Views /  Opinion | American aggression on trade could worsen

After achieving what looks like the outline of a trade truce with China, US President Donald Trump is now increasing pressure on India so that American products can be sold here with greater ease. Addressing US Congressional leaders through a letter, he has declared his intent to withdraw the benefit of duty-free entry granted to a slew of Indian exports under its Generalized System of Preferences (GSP) because India has failed to assure US companies “equitable and reasonable access" to its markets. If the move goes through, the impact could kick in as early as mid-May, with tariff barriers rising against Indian exports that totalled an estimated $5.6 billion last year. Given the country’s annual exports of more than $300 billion, that is no big deal. However, Trump’s move cannot be brushed off as one of low significance. The broad message it sends out is that Trump is ready to push countries that run a trade surplus with the US into adopting measures that would strike an import-export balance. In other words, India needs to batten the hatches for more salvos to come.

Although bilateral ties have been marked by trade friction for some time now, what seem to have triggered Trump’s latest offensive are India’s recent policy decisions that could hurt American online retailers and pharmaceutical companies. Key among these are restrictions placed on e-commerce companies that have upset Amazon and Walmart. India has also directed firms such as Mastercard and Visa to store user data locally (and not overseas). Price caps on medical implants are another sore point. In addition, the Trump administration wants India to cut import duties on its agricultural goods, dairy output, and some technology products. India has said that it is willing to concede ground on some US demands—on heart implants, for instance—and review its policy. Negotiators have also argued that providing concessions on IT and telecom equipment would work to the advantage of countries such as China more than the US. The US, though, unsatisfied with what India has on offer, has complained of a “wide array of trade barriers" that it accuses the country of having erected. It is true that Indian custom duties have been going up bit by bit, and not just in retaliation to US measures such as its steel tariffs imposed last year, a hit-back over which India has dithered more than anything. Moreover, add-on levies often make the real rate hard to determine. What’s worse, at least from a policy perspective, is that the list of items that have seen duty tweaks does not look coherent. Ad hoc changes here and there have not helped. Last year, India unilaterally halved its import duty on high-end motorcycles after Trump criticized the tariffs on these. It led the US president to boast that all it took was two minutes of his talking for India to back down.

What comes next is hard to foretell, but there are signs enough that India urgently needs to get its act together. To begin with, the country needs clarity on both the principles and pragmatism of its approach to world trade. If the country is to rebuff American efforts at arm-twisting it for the sake of America Inc., New Delhi would have to make a forthright argument that is consistent with its broad stance, while quietly calculating what might be worth yielding and for what gains. 

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