CUTS Washington Monthly Brief
#12, March 2019
A Roadmap for Addressing Indo-U.S. Trade Irritants

Since the U.S. announcement of its withdrawal of benefits to India under Generalised System of Preferences (GSP) on March 4, 2019, it is speculated that the Indo-U.S. trade relations may plunge into a downward spiral. Mark Linscott, Former Assistant U.S. Trade Representative for South and Central Asian Affairs and Senior Fellow,  Atlantic Council ‘’cautioned that this action could be a first step in a series that might follow, with a cumulative effect of creating significant new tension in the bilateral trade relationship’’. 

In this context, it is important to note that India has maintained restraint by not imposing retaliatory tariffs after the U.S. imposed steel and aluminium tariffs on countries including India a year ago.  In an election season, however, India may either delay it further or roll out its tariffs on U.S. goods for the sake of not being considered as a weak nation.

Furthermore, in the U.S., policy makers are now demanding that  actions be taken to curb imports of shrimp from India, contending that they are heavily subsidised.  Also, in 2018, the U.S. Food and Drug Administration intensified their number of inspections of Indian drugmakers’ manufacturing practices by 24 per cent more than a year before. Moreover, issues around data localisation and e-commerce, among other market entry barriers, are likely to complicate bilateral relations.

However, despite this current trade environment, it will be wiser for both the countries to avoid hitting a new low.  Experts believe “negotiation to be the only way out of the India-U.S. trade conflict and the negotiation must work towards achieving rapprochement in the short-term and a partnership in the long-term”.

Our recent Policy Note (U.S. Withdrawal of GSP Benefits to India: Need to look at the bigger picture) suggests a constructive approach that both the countries may adhere to from further abating their economic and strategic interests. 
The opportunity cost of retaliatory measures will be significant and unbearable. Not only will that dampen the bilateral vows of taking relations to greater heights but also cause trade diversion in favour of third countries.

Pradeep S. Mehta
P.S. We have now completed one year in DC and welcome your comments, good wishes and blessings
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