India, US heading for a trade war?

Robust strategic relations notwithstanding, India and the United States may be heading for a big showdown on the trade front that’s key to sustained bilateral engagement on equitable terms. The US seems to have turned snobbish vis-à-vis India, stoking fears of a full-scale trade war between the two countries. Otherwise, how does one explain the latest US Federal Court stand declining to intervene in cases where Indian technology professionals with H-1B visas were denied permission to switch jobs? There’s hardly any logic in the United States Citizenship and Immigration Services decision to repeatedly deny requests by US companies seeking transfer of Indian professionals with H-1B status. This apart, the Trump administration has denied spouses of technology professionals the right to work in the US. Also, its resistance to granting visas to high-value technology professionals on flimsy grounds, repeated and periodic increases in visa fees are steps abhorrent of the tenets of free trade that have always been aggressively marketed by the US in the past.

US President Donald Trump and his trade team led by Commerce Secretary Wilbur Ross and Trade Representative Robert Lighthizer seem to have embarked upon a ‘restrictive trade policy’ that threatens the annual bilateral trade, worth $125 billion, with India. The US decision to withdraw export incentives to Indian exporters on 1,900 items under the Generalised System of Preferences (GSP) impacts exports worth $5.8 billion. GSP benefits by nature are non-reciprocal and non-discriminatory arrangements to support developing countries. The withdrawal comes into effect beginning May 2, but India continues to hope that these concessions may be extended. Trade tensions between the two countries have heightened after the US government slapped additional duties on Indian steel and aluminium exports a year back. India’s patience in dealing with the Trump administration came to be tested as New Delhi repeatedly put off its move to slap counter-measures on 29 items exported by the US.

Apart from Harley Davidson motorcycles and US whiskeys, Trump’s quixotic regime seems keen on pushing medical devices, such as stents, at irrational prices, dairy products and information technology and communication industry items unabashedly. The aggressive approach is notwithstanding the fact that companies like Apple, Amazon, Uber, Facebook and Google benefited from India’s liberal and open e-commerce regime. This has also led to a huge reduction in trade surplus enjoyed by India to a modest $4 billion. The self-centred US trade policy paradigm is untenable as India’s weighted average tariff at a modest 7.6% compares very well with those of several developing economies and is within WTO-mandated bound rates. A new Indian government will have to quickly settle festering trade issues with the US on a priority basis to mutual benefit.