New Delhi must snap out of its denial on the discord with the U.S. on market access

After a scathing speech by U.S. Commerce Secretary Wilbur Ross in New Delhi this week, it is no longer possible for the government to brush under the carpet its differences with Washington. Speaking to Indian and U.S. businesspersons, Mr. Ross lashed out at what he called India’s unfair trade practices and “overly restrictive market access barriers”. His comments followed a series of measures by the U.S. that have affected India. These include a refusal to revoke or waive tariff increases made last year on steel and aluminium, an ultimatum that India “zero out” oil imports from Iran by May 2 even without securing comparable alternatives, and the decision to withdraw India’s GSP (Generalised System of Preferences) trade status. Mr. Ross repeated President Donald Trump’s accusation that India is a “tariff king”, and threatened India with “consequences” if it responded to U.S. tariffs with counter-tariffs, something New Delhi had threatened but not yet implemented in the hope of hammering out a comprehensive trade package. Despite rounds of talks, however, a package has remained elusive, and it is time for the government to articulate the problem on its hands.

In the face of growing U.S. aggression on the issue, the government that takes office after the election will have to urgently consider its options ahead. Clearly, the strategy of the past year, to ignore the differences in the hope that the problems would be resolved or that the U.S.’s trade war with China would occupy the Trump administration more, has not worked. New Delhi and Washington need to make a more determined attempt to sort out issues, starting from scratch if required, with tariffs. While the 50-60% duties on motorcycles and cars and 150% duties on American liquor that India imposes need a second look, the U.S. must see that average tariffs imposed by India (13.8%) are not much higher than those levied by economies such as South Korea and Brazil. In addition, the government will need to revisit some of its decisions like data localisation requirements and new e-commerce regulations, which were declared suddenly, while the U.S. must show some flexibility on India’s price caps on coronary stents and other medical devices. The U.S. must understand the cultural differences over the labelling of non-vegetarian dairy products. It is unlikely that the Trump administration will temper its “my way or the highway” approach to Iranian oil sales, and New Delhi will have to work closely with other countries to build alternative financial structures to avoid U.S. sanctions. Where a compromise is not possible, the government should be ready to push back on unreasonable demands. Perhaps the most worrying signal from Mr. Ross’s outburst was that Washington may not be willing to meet India halfway on trade issues. New Delhi must prepare accordingly.