US open to steel duty waiver for India if it lowers export volume

By: | Published: July 26, 2018 5:37 AM

The US has indicated that it will consider a waiver to India from its 25% additional tariff on steel, provided New Delhi offers an acceptable proposal to lower the volume of its supplies of the metal to the world’s biggest economy.

india, us, economySenior officials of the two countries huddled in Washington last week. (Reuters)

The US has indicated that it will consider a waiver to India from its 25% additional tariff on steel, provided New Delhi offers an acceptable proposal to lower the volume of its supplies of the metal to the world’s biggest economy, sources told FE.

The move is important, as a failure to strike a deal soon will intensify a trade tussle between the two countries, with India having already notified its plan to slap retaliatory measures worth $235 million against 29 American items from August 4.

Senior officials of the two countries huddled in Washington last week to hammer out a ‘trade package’ in which all the contentious issues — including the Trump administration’s decision to levy extra duties on steel and aluminium (10%) from India — were discussed. India is now working on a proposal to see if lower volume of steel supplies, with the exemption from the extra tariff, will serve its interest better. Once it finalises the proposal, it will be submitted with Washington to carry forward the negotiations, said the sources.

For its part, the US hasn’t yet suggested any volume threshold for steel supplies from India to qualify for exemption; instead, it has asked India to submit the proposal first which can then be considered, according to the sources.

Earlier, the US had rejected India’s proposal to offer it an exemption from the extra tariff, prompting New Delhi to submit its retaliatory plans with the World Trade Organisation (WTO) in June.

New Delhi has estimated that the US could mop up $198.6 million from additional duty on steel and $42.4 million on aluminium. Its submission to the WTO was based on the fact that the US imported Indian steel worth $794.6 million and aluminium worth $424.3 million in 2017.

Accordingly, New Delhi has notified retaliatory plans — the duty on American apples will be raised by 25% and almonds by 20%. Among other items, India has notified an extra tariff of 10% on diagnostic reagent and binders for foundry moulds, 15% on certain steel products, 10% on select pulses and 15% on phosphoric acid. These duties are proposed to be made effective from August 4 unless both countries work out a solution.

As such, while notifying the higher tariff for US goods, it excluded bikes from the purview of retaliation for now. (“High” Indian tariff on Harley-Davidson bikes had been a sore point with US President Donald Trump.) This suggested that despite facing extra US tariff on its steel and aluminium, New Delhi was still keeping its doors open for a meaningful engagement. It has already conveyed to Washington that it is one of the very few countries with which US’ goods trade deficit has decreased in the last one year — by almost 6% to $22.9 billion in 2017.

In fact, India’s merchandise imports from the US jumped a massive 38% in the first quarter of this fiscal to $8.53 billion and the US emerged as India’s second-biggest goods import destination (after China). At the same time, its exports to the US grew only 11.7% in the June quarter. This means India’s merchandise trade surplus with the US could shrink for a second straight year. Both countries have identified some key areas, and would build on them further during the course of negotiations.

For India, greater access to the American market in food, farm, engineering goods, auto and auto parts segments hold promise in the long term (over five years). The US sees good prospects for its companies in Indian civil aviation, oil and gas, education service and agriculture segments.

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