Let's Talk India
In this episode, the Trade Guys welcome another special guest: CSIS’ resident India scholar, Rick Rossow. Rossow holds the CSIS Wadhwani Chair in U.S.-India Policy Studies, and formerly served as the deputy director of the U.S.-India Business Council (USIBC). What’s with the President’s beef with India on Harley Davidson? What trade war is brewing between the U.S. and India?
What We’re Reading
“Delhi yet again defers levying retaliatory tariffs on US products valued at $235 mn”
“India on Monday yet again deferred enforcing retaliatory tariffs by 45 days against 29 US products worth $235 million. The higher tariffs to counter the US move to unilaterally raise import duties on Indian steel and aluminium products were supposed to come into effect from Monday.”
“Though both sides have constructively engaged to finalize a trade package, disproportionate demands by the US government have delayed attempts to finalize the deal, a commerce ministry official said speaking on condition of anonymity.”
“India on 20 June notified that it will raise tariffs on 29 US products, including almonds, apples and phosphoric acid worth $10.6 billion in imports in retaliation at the steel and aluminium tariff hikes by the US. But India did not impose the tariffs immediately, unlike other major trading partners of the US, as the two countries were engaged in bilateral negotiations to finalize a trade package to douse tensions. The duty hikes were then to come into effect on 4 August, but India has since continued to push back the decision.”
“On the trade front, both sides continue to blow hot and cold. India is negotiating a trade package with the US and has been demanding a waiver on tariff hikes similar to the ones the US granted to Argentina, Brazil and South Korea. US President Donald Trump, who has accused India of practising unfair trade, has said he wants to end subsidies to countries such as India and China.”
Why it matters: For the fourth time, India has delayed imposing retaliatory tariffs on products worth $235 million from the United States in response to the Section 232 steel and aluminum tariffs. The tariffs are now set to come into force on January 31, although another delay is always possible. The delay comes amid negotiations between the two countries for a trade package aimed at easing tensions, although progress appears to be slow.
Key questions: Why has India continuously delayed imposing retaliatory tariffs against the United States while other U.S. trading partners have? What are the advantages and disadvantages of delaying retaliation? Do negotiations have any chance of success?
“Customs duty raised in Budget 2018 to promote Make in India campaign”
“Finance minister Arun Jaitley’s budget for 2018-19 proposed an increase in customs duty on a range of products—from fruit juice to mobile phones—to incentivize domestic value addition and boost the government’s Make in India programme.”
“’I propose to increase customs duty on mobile phones from 15% to 20%, on some of their parts and accessories to 15% and on certain parts of TVs to 15%. This measure will promote creation of more jobs in the country,’ the finance minister said in his budget speech on Thursday.”
“Customs duties have been significantly raised in more than 10 sectors to discourage imports, mostly from China and other Asian countries. ‘Jaitley has put his thrust on ‘Make in India’ and proposed to increase customs duty rate on various products such as completely knocked down or semi-knocked down imports of commercial and passenger vehicles, mobile phones, watches, oils of crude and edible grade, fruit juices, perfumes and toiletry preparations, footwear, imitation jewellery, among others to incentivise domestic manufacturers,’ said Abhishek Singhania of consulting firm PwC.”
Why it matters: This year, India hiked tariffs on a wide range of products in a bid to boost domestic manufacturing and production as part of its “Make in India” program. Items subject to the tariff hike include electronics, vehicles, cosmetics, and agricultural products. The tariff hikes came after previous duty increases, continuing India’s tilt towards high import barriers.
Key questions: What is the Make in India program? Are tariffs the best route to grow India’s manufacturing base and move it up the supply chain? Should additional tariff hikes be expected?