The two-day US visit of commerce and industry minister Suresh Prabhu, his first such high-level engagement since the US slapped duties on Indian steel and aluminium, is unlikely to be easy, as both the sides have so far not shown any conciliatory approach after US President Donal Trump raised the prospect of a global trade war earlier this year. Prabhu’s visit commenced on Monday.
While Prabhu will impress upon the US to exempt India from taxes on metals and relax a visa regime for foreign skilled professionals, especially those in IT, the US is expected to insist that India improve market access to American products, especially in agriculture, to restore trade balance and remove price curbs on medical equipment as well as a 50% duty on imports of new, fully-assembled Harley Davidson bikes. Nevertheless, the visit creates scope for both the countries to tone down the trade tussle, an official source told FE.
During the course of his visit, Prabhu will huddle with US commerce secretary Wilbur Ross, trade representative Robert E Lighthizer and transport secretary Elaine Chao, apart from Senators, Congressmen, think-tanks and businessmen.
The minister is expected to ask the US to de-link a special tariff regime (generalised system of preference or GSP) that the US offers to some poor and developing countries, including India, from talks on greater market access. He will also invite US companies to make civil and defence aircraft in India.
Prabhu’s visit comes at a time when efforts to persuade the US to exempt India from the 25% duty on steel and 10% on aluminium or view New Delhi’s export subsidies in proper context haven’t yet yielded results. Trump has already angered China and upset allies in the G7, signalling escalation of a trade war.
India, too, has been affected in this process, as Trump has threatened to spare none in his attempts to reduce what he calls massive trade imbalance facing the US. “This isn’t just G7. I mean, we have India, where some of the tariffs are 100%. A 100%. And we charge nothing. We can’t do that,” Trump said, as he threatened to stop trade with countries “who are being unfair” to the US.
While Trump is known to take liberty with truth (Last year, too, he hinted that Harley Davidson was taxed 100% in India for imports from the US, while the fact was that the bikemaker was paying as little as 10% on much of its supplies that it brought in completely knocked-down conditions), Prabhu will clarify India’s position. India already reduced the import duty on superbikes in February to 50%. Earlier, imports of motorcycles with engine capacity of 800cc or less attracted a 60% duty while those above 800cc attracted a 75% duty.
This apart, both the countries have much to mend. India has dragged the US to the World Trade Organization over the duty on steel and aluminium, having already raised objections to massive illegal subsidies by the US in the renewable energy and agriculture sectors. The US has sought to raise a dispute at the WTO against India’s export subsidies, claiming that such sops (worth around $7 billion a year) hurt American workers.
While China alone accounted for a massive $375 billion, or 46%, of the US goods trade deficit of $810 billion in 2017, India made up for just 2.8% and occupied the 9th spot in the list of nations with which the Trump administration seeks to pursue a trade balance agenda.