Most of the media attention these days is on the U.S.-China trade fight and on the slow Congressional pace toward approval of the new NAFTA.
However, Bloomberg also is calling attention to the potential vulnerability of U.S.-India trade negotiations that were suspended earlier. The report says potential outcomes include a limited trade deal, or could be undercut by the same type of aggressive approach the administration has taken with China.
Bloomberg raises the question of whether President Donald Trump's “cordial relations” with Indian Prime Minister Narenda Modi are strong enough to avoid confrontations over trade barriers on medical devices, agriculture, telecommunications equipment, and energy.
Still, there are potential paths to deals — India can diffuse potential escalation by taking small steps such as a better model for medical device price caps, concessions on heavy bike tariffs and addressing some agricultural issues, said Richard Rossow, senior adviser at the Center for Strategic and International Studies.
However, so far those concessions have not been forthcoming, Sadanand Dhume, American Enterprise Institute resident fellow, told Bloomberg. Whether that is changed by increased U.S. pressure is the “million dollar question,” he said.
Recently, Trump lashed out against India’s tariffs and special World Trade Organization privileges. His lead negotiator, U.S. Trade Representative Robert Lighthizer, ended India’s duty-free benefits last summer with the comment that India must address trade barriers or face some unspecified “additional actions.”
“It’s looking like “China 2.0,” Ashley Craig, co-chair of Venable’s International Trade Group, said. “It’s all of the same — shock and awe,” Craig said of the administration’s trade strategy.
Unless India is willing to make concessions, a deal is unlikely, Nicole Bivens Collinson, who leads the international trade and government relations practice at Sandler, Travis & Rosenberg P.A., said.
Modi and Trump agreed that their top officials would meet to address trade tensions but no date has been set. Modi and his delegation will attend the UN General Assembly in New York in late September, a trip that is prompting speculation that Lighthizer could hammer out initial outlines of a deal on the sidelines with Indian Commerce Minister Piyush Goyal.
Analysts are looking for hints about whether talks may proceed since the President has twittered about a “very big trade deal” on the horizon and also complained that India has had a “field day” with tariffs.
Working against a possible deal is widespread frustration across the U.S. government with India’s trade barriers, Rossow said. But India has more leeway for deal-making now that Modi won re-election, he said.
When the recent talks on India’s agriculture barriers, high tariffs on IT products and Harley Davidson motorcycles and medical device price caps collapsed last June, the U.S. canceled India’s GSP duty-free benefits. In retaliation, India hiked tariffs on 28 U.S. products costing U.S. exporters about $1 million dollars daily, Dan Anthony, vice president of The Trade Partnership, said.
“India is digging a hole deeper and deeper by continuing to raise customs duties,” Rossow said.
The tariff threat has spooked U.S. multinationals who already have a strong foothold in India and view it as a natural place to expand as the trade standoff with China has them seeking alternative sourcing.
“India is a very logical spot to go” as companies look to leave China, Karen Giberson, Accessories Council president, said. Possible tariff escalation is threatening industries that could face having yet another sourcing option compromised.
Business groups and lawmakers want India to enact trade reforms but worry another trade war could rob U.S. importers of key sourcing options for manufacturing. Stakes are significant as U.S. goods and services trade with India totaled an estimated $142.1 billion in 2018 and generated a $24.2 billion trade surplus for India. Top exports from India to the U.S. include precious metal and stone ($11 billion), pharmaceuticals ($6.3 billion), machinery ($3.3 billion), mineral fuels ($3.2 billion), and vehicles ($2.8 billion). However, the trade partnership has been growing with U.S. exports to India rising by 26% in the last quarter, according to Mukesh Aghi, U.S.-India Strategic Partnership Forum president.
So, we will see. The administration is pushing back hard on any argument that its trade policies are requiring support from Fed interventions in monetary policy, but the debate has become increasingly contentious and increasing political. This is a fight producers should watch closely as it proceeds, Washington Insider believes.
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