Donald Trump administration talks tough on trade: India needs to keep its powder dry as strategic ties seem shaky

The question to ask after the threat by US President Donald Trump to withdraw import duty exemptions for India under a Generalised System of Preferences (GSP) status: Is this a marriage on the rocks or is this the end of a honeymoon? Remember, India is supposed to be a "global strategic partner" of Uncle Sam, and the term rings hollow now every which way. India's first reaction has been of restraint and maybe, just maybe, there is some God lurking in the details we do not know yet, but everything in the timing and the manner of Trump's move suggests that hugs and handshakes do not really matter when it comes to ground reality.

On the face of it, $5.6 billion worth of exports from India being affected by the potential withdrawal of duty-free trade looks like a small amount, but this constituted 11 percent of India's exports to the US in 2017-18. If you add to that the tougher scanner through which a US visa regime helping Indian scientists and technologists have been put through, you would think the heat is on.

 Donald Trump administration talks tough on trade: India needs to keep its powder dry as strategic ties seem shaky

File image of Narendra Modi and Donald Trump. AP

We are supposed to remind ourselves that it is China that the US is fighting a trade war with. If India is treated like a virtual stranger in tone and tenor by Trump, as his words like 'Tariff King' applied to India indeed hint, more than the numbers, there seems to be a lowering of India's diplomatic potential in the world's eyes.

Coming within days of India and Pakistan facing off over a terror attack in Kashmir's Pulwama and India's pre-emptive air strikes in Pakistani territory, there is reason to believe that New Delhi may have to hasten slowly in a complex landscape of geopolitics. A mood spoiler from Trump is hardly what the doctor ordered under the circumstances.

It is, of course, true that India is no longer the same old developing country. Nor is the US the superpower it used to be. An increasingly inwardly looking US with a president fond of pleasing his domestic admirers than policing the planet is a hard reality. So is the fact that India as the world's fastest-growing major economy has come a long way since the birth of the World Trade Organisation (WTO) in 1995.

Early reports from the Ministry of External Affairs suggest that after Day One restraint, India is keeping its powder dry for retaliatory tariffs on 29 items from April. That is the way it should be. If curbs on walnuts and chickpeas could compensate or at least provide a palliative retaliation on duties faced on Indian steel and aluminium, it might even the game up a bit. But then, a tiff is a tiff is a tiff.

The US cannot eat the cake of being a strategic partner while having the privilege of reckless action and loose words. Before dropping his trade scare, Trump had made patronising remarks on tensions between India and Pakistan after the Pulwama attack, and it almost felt like 1990 all over again.

The planned US action affects labour-intensive sectors such as gems and jewellery, which are among job spinners. Last November, invoking import ceilings, Washington had withdrawn  duty benefits worth $75 million for Indian exports of some musical instruments, dairy items, leather, textiles and chemicals.

The worrying thing for India is that the external sector is critical for its growth. India's trade deficit has been widening while its once lucrative markets in the West have turned protectionist or inward-looking on issues ranging from merchandise imports to visas amid a slowdown in overall export potential.

All that is taking place in the backdrop of a proposed e-commerce policy in India which has a whiff of protectionism in data use while trying to separate the marketplace functions of giants like Amazon and Walmart from their own ventures selling merchandise. These are likely to be inevitably part of trade talks with the US sooner or later, though some anti-monopoly concerns are common to both the US and India.

Overall, India now has to live with the fact that it has problems to fix on the external front while no longer enjoying truly strategic forbearance from the US. This is no time for nostalgia or sentiment. Given election-year uncertainties and geopolitical tensions in South Asia, we may do well to avoid fireworks in trade tussles, but hard-nosed talks are in order. If India is a Tariff King, Uncle Sam might well be a Trade Bully.

(The writer is a senior journalist and commentator. He tweets as @madversity)

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Updated Date: Mar 06, 2019 13:51:14 IST

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