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HomeDiplomacyIndia to do urgent sweet-talking to soothe Trump seething over Harley Davidson...

India to do urgent sweet-talking to soothe Trump seething over Harley Davidson & stents

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Commerce minister Suresh Prabhu’s trip comes as Trump threatens to undermine the special relationship built over the last decade, underpinned by the Indo-US nuclear deal.

New Delhi: American frozen chicken has finally landed on Indian tables, two years after a dispute at the World Trade Organization threatened to expose unfair trade practices adopted by Delhi. But commerce minister Suresh Prabhu still needs to assuage Trumpdom that India has no more intention of foul play over his next two days of conversations in Washington DC.

Prabhu’s balancing act comes as the US threatens to upend the international order, slamming India along with the rest of the G7 before he walked out of that summit two days ago and flew to meet the North Korean dictator in Singapore.

“This isn’t just G7. I mean we have India, where some of the tariffs are 100 per cent. A 100 per cent. And we charge nothing. We can’t do that,” Trump said.

The unease in Delhi has given way to serious disquiet. With the US President threatening to undermine the special relationship built over the last decade, underpinned by the Indo-US nuclear deal, Prime Minister Modi asked Prabhu to pack his bags and fly to the US to do some sweet-talking.

The US President has his heart set on India significantly reducing duties on the Harley Davidson motorbikes. His government has slapped 25 per cent duties on Indian steel and 10 per cent on aluminium. The situation is already fraught over visas for IT professionals and now their spouses, whom the US has decreed cannot work there anymore.

The latest chapter in the ongoing argument on market subsidies now has Washington threatening to take India off its Generalised System of Preferences (GSP), arguing that Delhi no longer requires the special tariff regime offered to poor and developing countries because its economy is doing much better.

Arguing that Americans are hurt by these export sops, Trump recently threatened “reciprocal tariffs” if India doesn’t play fair.

As if things couldn’t get worse, a new row is building up over Indian domestic protection against US medical stents and other equipment. Delhi has slashed duties on these items citing market access and health for all. But the American medical industry is eyeing India’s lucrative $5 billion medical equipment market and doesn’t want to give it up.

Prabhu, who has flown to Washington on short notice with a full delegation of 10-12 officials from the commerce ministry, will go head to head with his counterpart Wilbur Ross, US trade representative Robert E. Lighthizer, transport secretary Elaine Chao and a gaggle of other senators and congress members, besides corporates and businesspeople.

The Indians aren’t backing down, not right now. India has for long argued that the US massively subsidises agriculture. More recently, it added the accusation that Washington also subsidises the renewable energy sector. It has now taken the US to the WTO, arguing that duties on steel and aluminium are patently unfair.

The GSP threat is far more serious, Indian officials admit, pointing out that the withdrawal of the $7 billion worth of annual sops will hit small and medium entrepreneurs in diamond jewellery — most of whom work in Gujarat — as well as in marine products and pharmaceutical industries, the hardest.

As much as 30 per cent of Indian jewellery exports go to the US annually, while the figure for shrimp and prawn is even higher at 40 per cent. Besides, as many as 3,500 Indian products have had duty-free access under GSP so far.

Prabhu will argue that, unlike China, which accounts for $375 billion or 46 per cent of the US goods deficit (out of a total of $810 billion in 2017), India accounted for only 2.8 per cent. Prabhu will make the general invitation to US civil and defence aircraft to “make in India”.

But it is the Harley Davidson bike that is taking up much of the airtime. Even after Modi called Trump in February and told him that he had ordered duties on bikes above 800 cc engine capacity reduced from 100 per cent to 75 per cent to only 50 per cent, while those in completely knocked-down conditions would attract only 10 per cent duty, Trump went on to publicly air his grievances.

At a gathering of governors from all US states in February, Trump said: “Now, the Prime Minister, who I think is a fantastic man, called me the other day and said we are lowering it to 50 per cent. I said okay, but so far we’re getting nothing. So we get nothing. He gets 50 (per cent), and they think we’re doing, like they’re doing us a favour. That’s not a favour.”

“I wasn’t sure, he said it so beautifully. He’s a beautiful man. And he said, ‘I just want to inform you that we have reduced it to 75, but we have further reduced it to 50’. And I said, huh. What do I say? Am I supposed to be thrilled? And that’s not good for you people, especially as governors. It’s just not right. And we have many deals like that,” Trump added.

“So when they have a motorbike, a big number, by the way — they have a company that does a lot of business. They have a motorcycle or a motorbike that comes into our country — the number is zero. We get zero. They get 100 per cent, brought down to 75; brought down, now, to 50. Okay,” Trump said.

Away from the rhetoric, however, the figures aren’t that bad. Exports to the US have actually grown, from $42.21 billion in 2016-17 to $47.87 in 2017-18.

At the WTO, Delhi will argue that steel and aluminium exports to the US are a mere 2 per cent. Raw steel exports amounted to only $330 million, while finished steel exports were worth $1.23 billion in 2016-17. Exports of aluminium and aluminium products were another $350 million.

A couple of days from now it will be clear if the chickens are coming home to roost or not. US legs will account for $300 million once India opens the floodgates. Prabhu’s attempt to create a level-playing field with the US could be a hard climb.

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2 COMMENTS

  1. “With the US President threatening to undermine the special relationship built over the last decade, underpinned by the Indo-US nuclear deal, Prime Minister Modi asked Prabhu to pack his bags and fly to the US to do some sweet-talking.”

    This claim is TOTAL FAKE NEWS. Suresh Prabhu’s visit was planned a long time ago and it had nothing to do with Trumps recent statements .
    Indian journalists should STOP peddling their editorializations and conjecture as “facts”. The truth maybe that India is concerned about Trump’s tarrifs – but the conjecture and motivations ascribed to it are totally fictitious.

    Trump may crib over import duties but India is neither violating WTO or any trade rules imposing import duties.

  2. Countries that have been rock solid allies for seventy years or more are struggling to keep their relationship with the US on an even keel. After trade fiction, the big worry in Europe now is about the future of NATO. India should have a very down to earth assessment of where it stands in the new US scheme of things.

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