Parallel tracks on trade ties (US India trade relations)

Excellent study material for all civil services aspirants - begin learning - Kar ke dikhayenge!

 Parallel tracks on trade ties (US India trade relations)

---

Read more on - Polity | Economy | Schemes | S&T | Environment

---

• Who is responsible : India-US trade relations are strained, with the US threat of withdrawing GSP benefits (Generalised System of Preferences). But what is responsible for it - domestic political considerations of the US, or that of India?
• A timeline of events : India changed the rules related to FDI in e-commerce. From Feb 1, 2019, tighter norms placed many new restrictions on firms like Wamart-Flipkart and Amazon. Walmart had paid $16 b to acquire Flipart in 2018!
• A big deal gone bad : Walmart family are close friends of Donald Trump. Their entire Flipkart investment is under a cloud now, and they are disappointed that a consultative approach was not used. Later, Trump's GSP threat arrived.
• Why India did it : There was fear that the ultra-low prices of Walmart will kill many small businesses in India. So now what? The FDI policy may be final, but economic diplomacy can still prevent removal of GSP benefits.
• Trade war in parallel : Trump had, in 2018, levied special duties of 25% and 10% on Indian steel and aluminium imports. India had warned of retaliatory tariffs (not done so far). Meanwhile, the US medical and dairy industries kept complaining of India not giving "equitable and fair market access".
• The trouble with medical devices : India has implemented strict price controls against imported drugs and devices, like cardiac stents and knee implants. Trade margins were capped. US manufactures complain of differential treatment vis-a-vis domestic Indian players.
• Technical details : India considers price to distributors as the price, for domestic firms. For imports, the landed cost of imports is taken. US firms want all curbs removed.
• An alternate route exists : Indian govt. has acted against huge price markups by price controls. So USTR says "price capping is a trade barrier". India can try the alternative – trade margin rationalisation measures (TMR), applying them to Indian and foreign products like.
• How much will India lose via GSP withdrawal : If we go only by the amount of tariff advantage lost, then a small figure emerges (USD 190 million). But actual loss won't just be this, as our exporters are competing with other low-cost producers in US for market share. Even small price hikes (once we lose tariff benefit) can mean loss of market.
• What all can be hit badly : Processed food, leather products, plastics, building materials, tiles, hand tools, engg. goods, cycles, pillows, woven apparel etc. And are these not the very industries that the new FDI regime is trying to protect?CONCEPT
• Summary : The new FDI regime's backlash is the GSP withdrawal by America, and India can still try and recover from the loss through diplomatic channels, and by using the right policy tools like trade margin rationalisation for medical devices.

Read more on - Polity | Economy | Schemes | S&T | Environment

Join UPSC Self Prep course | Online Course (PT Gurukul)  | Covid Special Course | Join PT courses

* Content sourced from free internet sources (publications, PIB site, international sites, etc.). Take your own subscriptions. Copyrights acknowledged.