CUTS Washington Monthly Brief
#3, June 2018

From the Editor’s Desk 

Trade and economics going for a big toss
As I wrote last month, the trade wars triggered by the Trump administration have started shaking the world. Undoubtedly, the global economy will be affected adversely with the poor - both countries and people - becoming the worst hit, without any gain to the US. It will be a loose-loose scenario.
Even the US Senate is worried about it, that they are proposing a law to curb the President's powers to decide on tariffs. Trump's friends in Harley Davidson are planning to start manufacturing outside the US so as to escape the punitive tariffs in Europe.
Trade relations between India and the US too are in a difficult situation. India's GSP benefits may get curtailed, which would affect the increasing bonhomie. This is already getting worsened by the US asking India to stop trade with Iran and/or buy missiles from Russia.
India is a friend of the US as much as it is a friend of Iran and Russia, and has declared strategic autonomy as the leitmotif of its foreign policy. On the top of it, the scheduled 2X2 dialogue between the two foreign ministers and defence ministers has been postponed again, which does not bode well.
                                                Pradeep S. Mehta
Message for our Readers
This is the third edition of the monthly brief from the Center, which carries select published news or comments on a relevant issue. There are equally important issues which may have been missed out to keep the Monthly Brief short and swiftly readable.
Readers are encouraged to send their own views and suggestions at:


Economists are Watching These Indicators to Gauge Trade War Pain
The global economy is showing the first signs of damage as a brewing trade war rattles financial markets and hurts corporate confidence. The escalating actions and threats between the U.S. and its major trading partners, including China and the European Union, pose one of the biggest threats to global growth.
The Costs of Trade War
The Trump administration's introduction of sweeping import tariffs on steel and aluminium raises the real possibility of a global trade war. The effects would be felt everywhere, but especially in the world's poorest countries, and everything from the current global recovery to the Sustainable Development Goals could now be in jeopardy.
Why India should worry about latest US tariffs
The US government hit its allies—Canada, Mexico and the European Union—with import tariffs on steel and aluminium last week, prompting threats of retaliation. The latest skirmish, ahead of a crucial G-7 summit later this week, points to the ever-present risk of a trade war and the growing trend of protectionism at a time when the global economic recovery is still wobbly.
Other Disturbing News:


Decision on Iran imports to be based on India’s interests, says Oil Minister
India will take a call on its imports from Iran based on its own interest and not under pressure, oil minister Dharmendra Pradhan said, responding to the US call to cut imports from Iran. “We will decide. Certain things are not to be judged on the opinions or somebody’s reaction,” Pradhan said.
India may seek exemptions from US to buy Iranian Oil
India will seek US exemptions to buy Iranian oil and work towards setting up an alternative payment mechanism to protect its trade with the Islamic Republic in the wake of US sanctions against Tehran, according to officials familiar with the matter.
U.S. shale producers warn Chinese tariffs would hit energy exports
China’s proposed tariffs on U.S. petroleum imports, part of a mounting trade war between the two countries, would crimp sales to the shale industry’s largest customer, adding new pressure on U.S. crude prices, energy executives and analysts said in interviews this week.
China to target US energy for retaliatory action
China is lining up retaliatory tariffs against the US to hit energy, which is one of its most successful export industries in recent years. Sales of US oil, gas and coal to China have been rising sharply, and the US energy sector has been running a bilateral trade surplus.



Geopolitics in the Indo-Pacific Calls for Flexible Geometry, Not Fixed Attachments
At the Shangri-La Dialogue in Singapore on June 1, Prime Minister Modi said that today we see the assertion of power over recourse to international norms. The aspiration for power is the distinguishing element of international politics, an undeniable fact of experience, as Morgenthau termed it. 
PM affirms India’s ‘strategic autonomy’
India’s principle of “strategic autonomy” remains strong, Prime Minister Narendra Modi said, drawing an equivalence in ties with Russia, the U.S. and China and cautioning against a “return to the age of great power rivalries,” at a conference in Singapore on Friday.
Indo-US strategic partnership sets stage for deals and drills
The strategic clinch with the US is set to get even tighter, with India signalling its readiness to ink two more bilateral military pacts, procure helicopters worth $3 billion and participate in a joint tri-Service amphibious exercise for the first time.
Govt ‘scrambles’ to balance Iran ties
Visiting US Ambassador to the United Nations Nikki Haley, who also holds a cabinet rank in Washington, had a tough message for India to join sanction regime against Iran. The message has sent India’s foreign policy mandarins struggling to balance relations with Trump Administration and Iran — where the country has strategic and energy interests.



India won’t stop fund flow to CPEC: Piyush Goyal
India will not prevent funding for the China-Pakistan Economic Corridor (CPEC) through a multilateral institution like the Asian Infrastructure Investment Bank (AIIB), despite being critical of the $50 billion transportation project that it believes infringes on India’s sovereignty.
India among top five friends, Beijing Moscow's top ally: Russia poll
Despite a significant cooling between traditional strategic partners Russia and India, India can still count itself as one of the top five "friends" of Russia. And for all the talk about Russia moving towards Pakistan, an annual opinion poll by one of Moscow's most respected think tanks shows Pakistan does not yet cross Russian consciousness.
US is closing doors to world’s smartest people
On 6 June 1944, American soldiers stormed the beaches of France, beginning a campaign that would roll back Nazi Germany’s control of Western Europe. It was an unprecedented display of military might and organizational prowess for the US.
US, a bitter pill for major pharma companies
Many Indian pharma majors have continued to show tepid earnings in the fourth quarter of 2017-18 — a trend that has persisted for six quarters in a row. While sales growth from the domestic and other markets have been reasonable in the fourth quarter, a stubbornly tough climate for the generic business in the US market has weighed on the overall performance of many Indian large-cap pharma companies.