India-US trade does not seem to promise a smooth sail after May 2
deadline but full of bumps. Trump has remarked that India is charging US 100
percent for many things and asked his officials, “Will you please work on them?
It's the craziest thing. It's stupid trade. We have so much stupid trade.”
But India has done well with a “very good” package to the US in the
last few months. India, indeed, has not agreed to US giving animal feed to its
cows on sentiment but 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
But USTR remains unfavourable to India and it is said the US
negotiators who are mainly lawyers want to ‘win’ unlike India that is for
compromise. Of late, Indian negotiators appear driven to the conclusion that
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
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.