US commerce secretary asks India to have ‘balanced e-commerce policy’; Goyal says e-tail platforms not for predatory pricing
US commerce secretary Wilbur Ross on Thursday said there was no reason why a limited trade deal with India couldn’t be signed quickly, even as he asked New Delhi to balance the interest of large e-tailers like Amazon and Walmart-backed Flipkart with offline retailers’ in its e-commerce policy.
Addressing a session of the India Economic Summit organised by the World Economic Forum here, Ross said: “Amazon and other US retailers did not get to become the world’s biggest companies due to any evil reason. They have become what they are today due to efficiency. So India has to do the balancing act and decide how they can be doing their business.”
Speaking at the same session, commerce and industry minister Piyush Goyal, however, asserted that there was no change in India’s FDI policy for e-commerce. While the government wants to promote e-commerce, it also intends to protect small brick-and-mortar stores.
“E-commerce is an agnostic platform for trading, and not meant for predatory pricing. We don’t change rules mid way. We provide stable regulatory framework,” Goyal stressed. “Small retail is a sensitive subject, so India has restricted FDI in multi-brand retail at 49%.”
Responding to Ross’ observation that American e-tail giant Amazon’s investments in India have dropped, Goyal said the company might have front-loaded its investments and is, therefore, investing less now. Later in the day, Ross met Goyal and is learnt to have discussed greater and easier access for American companies to the Indian market in key segments, including medical equipment, agriculture and ICT products, including high-end smart-phones and smart watches. Ross has been a vocal critic of India’s “high tariffs”, although New Delhi has pointed out that its tariffs are still way below the WTO-mandated levels. Separately, Ross met finance minister Nirmala Sitharaman on Thursday.
As for FDI rules in e-commerce, India had issued a notification in December 2018, which barred online marketplaces with foreign investments from selling products of the companies where they held stakes or controlled inventory, and also banned exclusive marketing arrangements, among others. The government, however, stated that the notification was only a reiteration of existing rules and it was forced to clarify as it had received complaints that the e-commerce players were giving discounts on products sold on their platforms, thus, violating the FDI rules.
On the expectations of a trade deal, Ross, however, said at the Summit that neither country had suggested that it would be sealed in “five minutes”, tacitly acknowledging differences in negotiating positions.A limited deal was expected to be announced when Prime Minister Narendra Modi met US President Donald Trump on September 24 but persisting differences are learnt to have delayed it.
The US wants India to scrap/cut “not justified” tariff on ICT products (20%), motorcycles (50%) automobiles (60%) and alcoholic beverages (150%). It is seeking better trade balance with India through greater market access in agriculture and dairy products. Similarly, Washington wants New Delhi to remove price caps on medical devices like stents, a move that will help American companies like Abbott. The US has also expressed concern over what it thinks India’s “frequent changes” to e-commerce FDI rules, and data localisation.
India fears that it could lose as much as $3.2 billion a year if it scraps duties on the seven ICT products, including high-end smart-phones and smart watches, acceding to US demand. Also, China, not the US, will be the biggest beneficiaries of any such move, as the US made up for only 2% (or $415 million) of India’s imports of these seven products worth $20.5 billion in FY18. Instead, India offered to cut tariffs in those ICT products where the US could benefit more. But Washington remains unimpressed.
For its part, India is pitching for an exemption from the extra duty imposed by the US on steel and aluminium, resumption of duty-free export benefits for some Indian goods under the so-called Generalised System of Preferences (GSP) as well as greater market access for its products in sectors ranging from agriculture, automobile and auto components to engineering.
India’s exports to the US, its largest market, touched $52.4 billion in 2018-19, while imports were to the tune of $35.5 billion. Its trade surplus with the US has been shrinking in the past two years, as it has stated importing oil and gas from the largest economy, something that India has been highlighting.
According to the US government data, New Delhi’s trade surplus with Washington eased to $21.3 billion in 2018 from $22.9 billion in 2017. In contrast, China’s trade surplus with the US widened further to a record $419.2 billion last year from $375.6 billion in 2017, despite the tariff war between the top two economies.