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Is India risking key strategic ties with US by taxing few rich Harley Davidson buyers?

US President Donald Trump criticised India’s 50 per cent import tariff on Harley Davidson motorcycles, saying it was “unacceptable”.

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US President Donald Trump criticised India’s 50 per cent import tariff on Harley Davidson motorcycles, saying it was “unacceptable”. Trump has called India a “tariff king” and threatened to impose reciprocal tariffs on Indian products. The iconic Harley Davidson sold just 2,676 motorbikes in India in 2018-19.

ThePrint asks: Is India risking key strategic ties with US by taxing few rich Harley Davidson buyers?

Trump’s obsession with a small matter has lowered US’ vision of ties with India to an immature level

Kanwal Sibal
Former foreign secretary and executive council member, VIF

If the strategic relationship with the US hinges on India’s tariffs on Harley Davidson motorbikes, then it is neither strategic nor worth saving.

US President Donald Trump should have a broader view of India-US ties rather than be obsessed with such a very minor matter. That he has lowered America’s vision of ties with India to this immature level is no reason India should pander to him.

If it is Harley Davidson issue today, he could pick up another issue tomorrow to mock India. His larger grouse is against India’s high tariffs (within WTO rules), and he has criticised India and some other countries at the behest of US pharmaceutical and IT (Apple) companies and dairy producers.

Trump is ignoring that with lowering of India’s trade barriers, India-US trade has expanded enormously in recent years, reaching a figure of about $88 billion in 2018, from a figure of about $5 billion in 1991, $37.5 billion in 2009 and $67 billion in 2014. The total two-way trade in goods and services was $142.1 billion in 2018, 12.6 per cent more than in 2017. The surplus in India’s favour is about $25 billion – vastly inferior to America’s deficit with China.

Trump’s America should not lose its sense of proportion and damage the growing India-US strategic partnership by focusing on trade alone and overlooking the grip of the US dollar on the international financial system of which India too is a victim.

Also read: Why Trump cares so much about India’s tariffs on a few thousand Harley Davidson bikes

Indian & US administration need to work as one – focussing on individual components will not serve any purpose

Alwyn Didar Singh
Former Secretary General, FICCI

Whether it is the issue of Harley Davidson, or any other trade or visa matter, both the Indian and US administrations will have to sit together across the table and bilaterally figure out a solution for them.

I am certain that when the Indian administration meets US Secretary of State Mike Pompeo, or when PM Narendra Modi meets US president Donald Trump, the result of the negotiations will be a package deal that will be acceptable to both parties. Both the Indian and US administration need to work as one pack, and focussing solely on individual components will not serve the purpose.

Whether it is visas, or aluminium, or now Harley Davidson import tariffs, we will only reach a consensus if we adopt a holistic approach. Sure, US President Donald Trump is upset and irked about Harley Davidson import tariffs, but that is his reaction to many things.

The negotiators are doing the best they can even now, but given the unpredictable nature of the Trump administration, we need to look at the bigger picture and not address individual issues because they don’t exist in silos.

Resolving trade tensions with US won’t be as simple as reducing tariffs on Harley Davidson

Aman Thakker
Research Associate, Centre for Strategic and International Studies, Washington DC

Despite US President Donald Trump’s repeated criticisms of Indian tariffs on Harley Davidsons, it is a bit too reductionist to say that Harley Davidsons are at the root of US-India trade tensions While it is true that President Trump’s administration is much more protectionist than those of his predecessors, India too has taken its fair share of protectionist measures in the past two years.

Indeed, raising custom duties on nearly 30 products, implementing price controls on medical devices, and introducing new restrictions in the e-commerce sector are much more central to the trade tensions with the United States. Any resolution on the trade front will not be as simple as reducing tariffs on Harley Davidson and will need to address these structural issues.

The way forward for both countries is to recognise the importance of the trade relationship, as well as the broader strategic relationship. US exports to India directly support nearly 260,000 jobs in the United States, while American companies create jobs in India, employing nearly one million Indians.

An escalating trade dispute threatens these jobs, as well as growing strategic relationship. As partnership between India and the US deepens, both countries should also recognise that partners can and should compromise when possible and create exceptions for each other when it is not possible, especially as broader interests for both countries hang in the balance.

India’s move signals it will not be brow-beaten into reducing tariffs by US

Rajat Kathuria
Director and Chief Executive, ICRIER

There are only a few Harley Davidson buyers and it isn’t worth taking on the US for them. But, such a move will send out a larger signal that India will not be brow-beaten into reducing tariffs by the United States.

Given how very unpredictable the current US administration is, if one complies to any of their demands, one doesn’t know what could be next. Today, it is the Harley Davidson, tomorrow it will be something else that pleases Donald Trump— succumbing to their demands could lead to an endless spiral.

Nonetheless, this is a difficult call for India. Given our strong interests in the United States’ market, there is nothing to prevent the US from reacting to the tariffs by taking a tougher position on visas, among other things.

I believe we should take this opportunity to reassess our entire trade policy. If we are going to take a more protectionist approach in favour of our domestic interests, then we need to state that explicitly, right at the outset. So, while in itself, the Harley Davidsons don’t matter, it is the signalling behind this move that is of consequence.

Also read: Is India’s protectionism reason enough for Donald Trump’s GSP move or is US being a bully?

India’s protectionist policies continue to hurt its economy and irk the Americans

Srijan Shukla
Reporter, ThePrint

India’s high customs duties on Harley Davidson’s motorbikes are just a symptom, not the cause of the India-US trade tensions. The real reasons for the Indo-US trade tensions are far more structural in nature and India can only partially alleviate them in the short-run.

As the world’s sole superpower, the US underpins the global economy and it has done so by opening up its markets to the world and absorbing all the excess supply.

As a consequence, the US suffers from chronic trade and current account deficits.

Now with a populist-nationalist Donald Trump in office, these chronic deficits are seen as a matter of concern. Trump has consistently targeted US’ trade partners such as India and China and asked them to reduce their respective trade surpluses with the US.

This is a structural issue and India can’t do much to resolve it in the short or even medium run. But there is something the New Delhi government can do.

India still has a strong protectionist hangover – when the economy is doing poorly, its reflex action is to hike tariffs. And these protectionist policies continue to hurt the Indian economy and irk the Americans.

So, there is a need for India to drastically lower its tariff and non-tariff barriers.

By Fatima Khan, journalist at ThePrint.

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  1. There is no point in lecturing Trump about how he must be flexible, accomodative , logical etc. Trump will be Trump and there is an end to the matter. On India’s side we have very foolishly raised tariffs on a host of imports and gone against the expectations that we will run as a modern economy. Mr Modi and Jaitley take the principal blame for this.
    While India must stand firm on strategic issues like the S 400 deals, the NDA Govt must quickly learn from the past UPA Govt about how to run a modern economy.

  2. Is India risking key strategic ties with US by taxing few rich Harley Davidson buyers?
    Is this the kind of question that ThePrint should ask? Does ThePrint thinks that strategic ties between India and USA can affect by tax issues on few motor bikes?
    Surprisingly the message from Srijan Shukla, ThePrint reporter doesn’t match with the message from others in this article. What’s media’s responsibility in such matters of national importance? Work for American interest or India’s interest.

  3. The value of these mobikes – or the import duty charged on them – is not even a rounding error. India’s list of issues with the United States is growing. Both trade related and to do with our relationships with other countries with whom America’s ties have deteriorated. It is good that a lifelong diplomat is now heading MEA. The talk of restricting H 1 B visas for India shows much needs to repaired. 2. If the US wishes to push expensive knee implants or heart stents and these are completely unaffordable for India’s health system, national interest requires that we resist. However, Shri Srijan Shukla’s basic point is valid. So many years after 1991, India’s economy should have been more open and integrated with the world, including its manufacturing supply chains. That is required to push up our sagging rate of growth. 3. On the diplomatic relationship with the US, some strains are attributable to President Trump’s style of functioning. There are indications that he might not get re-elected. However, there are other differences that are personality agnostic. India needs to prepare better to deal with a world where there are other centres of power, one next door, beyond the Himslayas.

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