US desperately trying to suppress the rising stature of India in global trading system

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Published: May 15, 2019 12:12:59 AM

The US is trying to suppress the rising stature of India in the global trading system.

The visit was immediately followed by the US announcement to increase H1B visa fee, which will affect Indian IT services exports to the US. The visit was immediately followed by the US announcement to increase H1B visa fee, which will affect Indian IT services exports to the US.

US Commerce Secretary Wilbur Ross recently visited India to raise the issue of supposedly high barriers to trade erected by India. This visit was preceded by a series of measures announced by the US against India, including putting India on the Priority Watch List in its annual Special 301 Report, terminating Iran’s oil sanction waivers available to India along with other countries, highlighting data localisation requirements in India as a key barrier to digital trade in the USTR National Trade Estimate report, announcement to terminate India’s designation as beneficiary developing country under the Generalized System of Preferences, among others.

The visit was immediately followed by the US announcement to increase H1B visa fee, which will affect Indian IT services exports to the US. Although many of these measures are not exclusively for India and include other countries too, they are intended to kill two or probably many birds with one stone.

The American tactic of announcing these threatening measures is to hit economically hard and arm-twist India so as to bring it to the negotiating table, and compel India to accept the American demands of increased market access through reduced tariffs on dairy products, wheat and Harley-Davidson motorcycles; removing the price caps fixed by the Indian government on medical devices of interest to US producers; change in India’s domestic IP laws for protecting windfall monopoly profits of the US IP holders, particularly in the pharmaceutical sector; no restrictions on cross-border data flows; roll-back measures pertaining to data localisation in financial services taken by RBI; and not to finalise the policy for its evolving e-commerce sector along the lines of the main elements contained in the draft e-commerce policy.

The US is also apparently unhappy with India’s submission in the World Trade Organisation (WTO) this February, cosponsored with the European Union and other WTO members on reforming the dispute settlement mechanism of the WTO. The US has been blocking new appointments to the Dispute Settlement Body (DSB) of the WTO, arguing over its role and leaving it with the bare minimum needed to function. The suggested reforms in India’s cosponsored paper widely differ from the position taken by the US on the functioning of the DSB and the reforms proposed by the US.

The US cherry-picked data to portray India as a highly protected country and described it as ‘tariff king’. But it is contrary to the fact. The highest tariff in India is 150% on alcoholic beverages, whereas in the US the highest tariff is 350% on tobacco products. Some other items having high tariff in the US include peanuts (163.8%), washing machine and parts (50%), footwear (48%), among others.

Not only this, India’s highest tariff is much lower than applied by many other countries such as South Korea (807% on sweet potato, quinoa and some cereals), Japan (736% on cereals and preparations), Australia (163% on transport equipment), to name a few. Even from the average tariff perspective, India’s average applied tariff is 13.4%, much below its average bound tariff at the WTO.

Apart from this, while talking about protectionism, why only for goods? Why not for services also? Going by the analogy used by the US, it should be called ‘visa fee king’ as the US imposes very high visa fees on H1B and L1, the two most prominent visas used by service providers to deliver services in the US through temporary movement of their employees.

This is not the first instance of the US cherry-picking data to put forth its interests. In its submission ‘An undifferentiated WTO: Self-declared development status risks institutional irrelevance’ in the WTO in January 2019, the US used selective data to claim that India and some other developing countries had made great development strides over the years and hence should not be allowed to take benefits of the special and differential (S&D) provisions of the WTO.

This is again contrary to the facts. While there is no denial that India and other developing countries have made progress over the years, the development divide is still very much present between developed and developing countries, and hence the need for continuance of S&D provisions.

The US is well aware that if there is any country after China that can challenge the hegemony of the US in the future, it is India. Therefore, the US is using these threatening and other tactics to suppress the rising stature of India in the global trading system, and to curtail the potential of the country to grow economically.

India has so far stood firm on most of these issues in its dealings with the US bilaterally as well as at the WTO. There is no reason to depart from this firm approach now. The government response and policy formulation should be driven by domestic requirements and not by any dictate from the US. At the same time, track II economic diplomacy through chambers of commerce and industry lobby groups could be encouraged to make the US aware of the losses that will incur to both sides, if such posturing by the US against India continues.

The author is Associate professor, Centre for WTO Studies, IIFT, Delhi. Views are personal

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