New trade policy signals confrontation with India

The new U.S. trade policy unveiled by Donald Trump administration earlier this month could turn India’s commercial ties with its second-biggest trading partner more contentious, according to an international trade expert and a U.S official.

“U.S will be a difficult partner to work with, particularly at the World Trade Organisation (WTO),” said Moushami P. Joshi, international trade lawyer with Pillsbury Winthrop Shaw Pittman, a leading Washington law firm. The Trump administration’s drive to reduce American trade deficit will bring India into sharp focus, she said in an interview. India is the 9th biggest trading partner of the U.S and India had a trade surplus of about $26 billion with the U.S, in goods trade alone last year. The numbers on trade in services for last year would be available this month. “The Obama White House never once mentioned trade deficit with India as a matter of concern. In fact, the discussions always were about the success in growing trade. That cannot be the case from now on,” a U.S. administration official who spoke on condition of anonymity told The Hindu. The official, however, saw a silver lining in the potentially tough posturing that the new administration would take. “The new environment would give Prime Minister Modi the argument for more reforms. So, this might actually do some good.”

“In 2016, voters in both major parties called for a fundamental change in direction of U.S. trade policy. … because they did not all see clear benefits from international trade agreements. President Trump has called for a new approach, and the Trump Administration will deliver on that promise,” the President’s National Trade Policy Agenda for 2017 said. It reiterates Mr. Trump’s campaign with its four-point agenda — “defending national sovereignty over trade policy, strict enforcement of U.S. trade laws, using leverage to open foreign markets and negotiating new and better trade deals.”

“..this is for the first time that we have it all spelt out in a document, clearly going against all traditional U.S positions on trade,” said Ms. Joshi. She said the document that mentioned India dozens of times has direct implications for New Delhi. “The emphasis on opening [the] market for U.S agriculture products and intellectual property are of particular significance for India,” she said.

“The push for agriculture directly affects India. We are in dispute at the WTO with the U.S. on poultry. India does not allow poultry imports from the U.S and it lost the case at WTO at two stages. Now, the U.S, is seeking punitive measures against India.. We can expect they will go full speed to force open the Indian market to U.S. poultry, under the Trump administration,” said Ms. Joshi. There will be a push for dairy products and beef too, as the document is a signal to the farming community in the U.S. that the Trump administration would stand by it, said Ms. Joshi.

‘U.S. won’t quit WTO’

The document rejected multi-lateralism as the favoured trade route for the U.S. but this is more in the context of FTAs such as NAFTA and TPP, which the U.S. has already withdrawn from. As for WTO, the Trump administration will use it more aggressively to push its trade agenda, Ms. Joshi said. The emphasis on sovereignty essentially means the U.S. would not abide by WTO decisions that are not in its favour, according to Ms. Joshi. “Not that this is something new. The U.S. has a very a poor record of enforcing WTO decisions that are against it anyway. This administration is saying it upfront. Already, developing countries are forced to go all the way to the final arbitration at WTO trade disputes, and even after that, the U.S. does not comply,” she said.

This new stridency will impact India directly, she said. “For instance, India has filed a case against the U.S for subsidising its solar panel manufacturing in certain U.S. states after we lost the case on solar panels brought by the U.S. .. India cannot expect a resolution on the solar panel case against the U.S. any time soon.” India is also challenging certain provisions of the U.S. H-1B visa programme as discriminatory against Indian companies and workers. “Expect no solution for years,” she said.

U.S is not going withdraw or walk away, according to Ms. Joshi. “That is not what the U.S is saying. To the contrary, WTO has been great for the U.S. ..What they are saying is that we will not enforce WTO rulings that are against our domestic law. It will not withdraw, as there are so many negotiations at WTO in which it has a stake, such as e-ecommerce, environmental goods and trade in services.”

India target of new U.S trade investigation

Meanwhile, India is among the target countries in a new investigation launched by the U.S. International Trade Commission (ITC). The investigation initiated by the Obama-appointed U.S. Trade Representative, seeks to study the “regulatory and policy measures in important markets abroad that may impede digital trade,” ITC said last month. “What they will be looking at is whether Indian policies prevent U.S. companies from servicing clients in India or selling digital products to India. Requirements such as localisation of servers, restrictions on data transfer across boundaries. Any big technology company will have a stake in this,” Ms. Joshi said. “If the ITC comes up with a conclusion, it will likely lead to a new WTO complaint against India.”