The US wants greater access to the Indian market for its dairy products.
India giving a landslide mandate to the Narendra Modi-led Bharatiya Janata Party government comes amidst Indo-US trade talks to iron out thorny issues that have dogged trade relations between the two countries.
Apart from looking at revving up the Indian manufacturing while keeping interests of the domestic industries at the forefront, Commerce & Industry minister in Modi 2.0, Piyush Goyal has a tough way ahead dealing with the US to reduce trade tensions.
The Donald Trump administration has repeatedly said that it wants lowering of duties on several products including Harley Davidson motorbikes. In February 2019, India had cut the import duty on heavier motorbikes such as Harley Davidson to 50% from 75%. The US wants it lowered even further.
Further, the US wants greater access to the Indian market for its dairy products.
The National Milk Producers Federation (NMPF) and the US Dairy Export Council have complained that India has resisted complying with existing WTO obligations for dairy products, suggesting Indian dairy certificate requirements for dairy imports are unscientific.
India, meanwhile, maintains that its position is based on religious, cultural and moral grounds which are in compliance with WTO rules which allow members to use measures that are “necessary to protect public morals.”
It also wants India to move to trade margin rationalization (TMR) and not price control on medical implants including stents and knee implants. In February 2016, Cardiac Stents were put under price controls. In August 2017. Knee Implants met with the same fate.
More recently, India was seen to be keen on fixing caps over Trade Margins for medical devices. However in doing so, an apparent differential treatment qua domestic and global players is apprehended, i.e. to possibly keep the base for Trade Margin fixation different for domestic and global players. Whereas, for domestic players, the base was proposed as the Price to Distributors, the same for Global manufacturers was proposed as the Landed Cost.
At risk is the withdrawal of preferential trade treatment for India, which allows duty-free entry for up to $5.6 billion worth of about 3,500 product exports to the United States. President Trump has argued that exports at zero or very low duties under the Generalized System of Preferences (GSP) is hurting the US and on March 4, 2019 announced that it was withdrawing the GSP benefits for India from May 1, 2019 (the Presidential Proclamation required to enact it has been tacitly kept on hold till after the new government comes in Delhi).
According to the USTR “India has implemented a wide array of trade barriers that create serious negative effects on United States commerce. Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion”.
Further, the Trump administration has time and again insisted that India is resorting to discriminatory trade practices. It has challenged India’s export subsidies at the WTO. It has threatened to increase import tariff on “thousands and thousands” of Indian motorcycles to the US.
On June 20, 2018, India announced that it will raise tariffs on imports of 29 products from the US, including almonds, apples and phosphoric acid, worth $10.6 billion. This was in retaliation to the steel and aluminium tariff hikes by the US in March 2018. This higher tariffs’ implementation, however, has been delayed multiple times. India further pushed back the implementation to June 16, 2019.
US Commerce Secretary Wilbur Ross held bilateral discussions with Commerce and Industry Minister Suresh Prabhu on May 6, 2018 on raft of issues. The US wants India to review its decision to cap prices on medical devices such as stents. The US is also pressing India to review its recent ecommerce policy and the Reserve Bank of India’s (RBI) insistence on financial services companies to store data in local servers.Whether the huge victory helps the Modi government in tackling the US’ demands, only time can say. But that it will make the government more aggressively push for ‘make in India’ is anybody’s guess.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.