On developmental considerations, there may be a few tariff peaks, which is true for almost all economies.
By Aziz Haider
India complied with the US directives to stop importing oil from Iran after American waivers granted to eight countries still buying the oil expired in the first week of May. Coerced by the US, which is aiming at the Government change in Venezuela, India has also ended oil import from Venezuela, increasing further its dependence on Saudi Arabia, Iraq, and the UAE.
Significantly, while the US deadline for importing oil from Iran was expiring in the first week of May, the US on 5th March 2019 gave a 60-day withdrawal notice to India on the Generalized System of Preferences (GSP) benefits extended by the US, thereby bringing the deadline around the same time when the deadline for oil purchase from Iran was expiring.
The message was clear! Though the Parliamentary elections in India stalled the process for a short-while, India was left with no choice but to comply. It complied on Iran and it complied on Venezuela, without for a moment considering its own trade loss and the threat to eroding of relations, particularly with Iran, which existed long before the US was even discovered.
As India-US trade talks commenced again today, the US is still playing headstrong even though India has given reasonable arguments from its side to come to some agreement. India has to decide till when it will continue to pay heed to adamant, constantly changing the stance of the US, keeping only its political and trade benefits in mind and unmindful of all the rest of the world.
While not paying heed to India’s heavy oil dependence from abroad, the US didn’t even bring into consideration India’s concerns related to its geopolitical interests in the area when it recommenced talks with the Taliban, who it itself had branded as a terrorist organization while sidelining the present and previous heads of elected Government, viz. Hamid Karzai and Ashraf Ghani. During the last five years, Afghanistan had become the second-largest recipient of Indian foreign aid and had invested heavily on infrastructure, including hospitals, roads, and dams, and contributing to the fabric of a democratic nation-state through various programs.
These investments were aimed at preventing Pakistan from setting up a friendly government in Kabul again, like in the 90s when the Taliban were in control, and also at avoiding the return of Jihadi groups like Al-Qaida from striking in India again, as they have done in the past. How laudable it would be that the US is seeking assurances from Taliban itself, designated as a terrorist organization, that it will not use Afghanistan to set up bases for terrorist attacks, in case the US leave the country, handing back the reins of power to the Taliban!
The US is also unmindful of India’s heavy investments in Chabahar, which are on the verge of getting wasted, due to the US sanctions against Iran. Chabahar investments too were in India’s interest, as they provided an unhindered trade link, bypassing Pakistan, not only with Afghanistan but also in reaching out to other Central Asian countries, including the former Soviet Republics. This Port is vital to India’s geopolitical interests for many reasons; it gives India an alternative to CPEC (China-Pakistan Economic Corridor) and provides India an avenue to expand its trade and access to energy resources, in the Central Asian region.
Constantly shifting US policies, aimed solely at its own political and trade interests, has brought losses to India time and again. Despite this, the US is still aiming at coercing India to the maximum when it comes to GSP-related trade talks.
The US had initiated the review on the basis of representations by the US medical devices and dairy industries, but subsequently included numerous other issues on a self-initiated basis. These included issues related to market access for various agriculture and animal husbandry products, relaxation / easing of procedures related to issues like telecom testing/conformity assessment and tariff reduction of ICT products. The Department of Commerce engaged with various Government of India departments concerned with these issues and India was able to offer a very meaningful way forward on almost all the US requests. In a few instances, specific US requests were not found reasonable and doable at this time by the departments concerned, in light of public welfare concerns reflective of India’s developing country status and its national interest.
India was ready to address US concerns regarding medical devices in principle, by putting in place a suitable trade margin approach in a reasonable time frame to balance concerns about fair pricing for the consumers and adequate remuneration for the suppliers. On the issue of dairy market access, India has clarified that while our certification requirement, that the source animal had never been fed animal-derived blood meal, is non-negotiable given the cultural and religious sentiment, the requested simplified dairy certification procedure, without diluting this requirement, could be considered. Acceptability of US market access requests related to products like alfalfa hay, cherries and pork was conveyed. On the reduction of our IT duties, India’s duties are moderate and not import stopping. Any MFN duty reduction would almost entirely benefit third countries. Accordingly, India conveyed willingness to extend duty concessions on specific items in which there is a clear US interest. On telecom testing, India was willing to consider discussions for a Mutual Recognition Agreement.
Due to various initiatives resulting in the enhanced purchase of the US goods like oil and natural gas and coal the US trade deficit with India has substantially reduced in calendar years 2017 and 2018. The reduction is estimated to be over $ 4 Billion in 2018, with further reduction expected in future years on account of factors like the growing demand for energy and civilian aircraft in India. This reduction has happened in the face of a rising overall US trade deficit, including with some other major economies. India is also a thriving market for US services and e-commerce companies like Amazon, Uber, Google, and Facebook with billions of dollars of revenue.
The issue of Indian tariffs being high has been raised from time to time. It is pertinent that India’s tariffs are within its bound rates under WTO commitments, and are on the average well below these bound rates. India’s trade-weighted average tariffs are 7.6%, which is comparable with the most open developing economies, and some developed economies. On developmental considerations, there may be a few tariff peaks, which is true for almost all economies.
India was agreeable to a very meaningful mutually acceptable package on the above lines to be agreed to at this time while keeping remaining issues under discussion in the future. But the adamant behavior of the US authorities in general, and President Trump, in particular, has resulted in a stand-off so far.
(The Author is an independent analyst writing on trade and bilateral relations. Views expressed are personal.)