China’s tariff cut plans may help India: Analysts

Any easing of trade war to boost global trade growth and help India.

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China has pledged to look into the sticky issue of greater market access to Indian farm products and agreed to resolve any issue that hurts the prospect of Indian pharmaceutical exports to that country.

The jury may still be out on whether China can pacify the Trump administration with its plans to cut tariff on cars and open up the financial sector, but any easing in the trade war raises the prospects of global trade growth, which would ultimately benefit India, trade analysts said on Tuesday.

Although much of Tuesday’s announcement by China is actually a reiteration of the past, and given that the proof of the pudding is in the eating, analysts said any move to offer better access in pharmaceuticals, agriculture, marine items and information technology would help India, which has been able to supply mostly raw inputs to the giant neighbour. China’s plan to better protect intellectual property rights could encourage Indian pharma companies to set up shop there.

However, a clearer picture on gains to India will emerge only when China announces details of its plans, said the analysts. Also, China’s effective employment of non-tariff barriers to discourage supplies of certain products from India and others while successfully avoiding WTO scrutiny remains a challenge.

EEPC India chairman Ravi Sehgal said: “Our stakes are quite high in the unfolding global trade tensions between the US and China. We would not like to be caught in the cross-fire.” He said India’s engineering exports to the US, its biggest market, went up 47% to $9.21 billion between April and February of 2017-18 from a year earlier. Though smaller in value, engineering goods shipments to China witnessed an impressive expansion to $2.8 billion during the April-February period from $1.62 billion a year before.

Ajay Sahai, director-general at FIEO, called for widening Indian production basket of value-added products to better capture the Chinese market.

Amid rising tension with the US, Chinese President Xi Jinping on Tuesday promised to open the country’s economy further and lower import tariffs to strike a conciliatory approach. China would also enhance the limit of foreign ownership in its automobile sector, which is of crucial interest to the US, and push for opening up the financial sector.

In a report, economist at Nomura said: “President Xi’s speech appears to have struck a relatively positive tone and opens the door to potential negotiations with the US in our view. The focus now shifts to the possible US response.”
“But of course actions speak louder than words.”

Before the trade war, the WTO’s quarterly outlook indicator had showed in February that global trade in goods will continue growing above trend during the second quarter. “The recovery of 2017 seems to be extending into the first quarter of 2018 at least, based on things like strong export orders, strong air freight and container shipping and other indicators. So it seems like there hasn’t been any slackening of momentum.” The WTO forecast overall growth in world goods trade will most likely be around 3.2%, compared to an estimated 3.6% in 2017.

Late last month, in a meeting of trade ministers of India and China and other officials, both the countries agreed to re-negotiate a bilateral investment agreement, apart from working on a road map to reduce the massive trade imbalance in favour of the world’s second-largest economy.

China has also pledged to look into the sticky issue of greater market access to Indian farm products and agreed to resolve any issue that hurts the prospect of Indian pharmaceutical exports to that country.

Official data show China’s exports to India were 1.8 times of India’s outbound shipments to that country in 2000-01. But at $63.2 billion, what China exported to India in the first ten months of the current fiscal was more than six times of what India shipped out to China. Consequently, India’s goods trade deficit rose from less than $1 billion in 2000-01 to around $53 billion in just 11 months of the last fiscal.

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