Benefits amid a climate of tariffs

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Benefits amid a climate of tariffs

Saturday, 10 August 2019 | Dinesh Jotwani

The US leadership wants to show there’s a new sheriff in town and things will be done differently from now on. Once all global actors toe its line, it will normalise trade relations with everyone

The trade mechanism put in place after World War II to facilitate global trade and create prosperity across the globe seemingly let down tens of millions in America. Blue-collar workers felt that the system didn’t work for them. Angry, they did what was unthinkable and elected Donald Trump to the most powerful office in the world. Trump espouses an “America First” policy, which American interests ahead of the corporates. The US, under Trump’s leadership, has reversed its decades-old policy of enabling China’s rise to containing it.

This has had implications for the India-US trade. While America’s modest $24 billion trade deficit with India pales in comparison to its $222 billion trade deficit with China, the American leadership is leaving no stone unturned in working for its people even if it means erecting tariffs on goods exported by us. To mitigate the impact of a potential trade war, the Indian leadership should understand that in the eyes of the blue-collar American voters, China is the real threat, India much less so. Consider that farmers in America, who benefited significantly from exporting soy to China, aren’t fazed that the latter has erected tariffs on products they export; they see this as a necessary part of containing the Middle Kingdom, whose ascent could dramatically alter the global landscape and America’s ability to lead. Americans, who value commerce, are willing to endure financial losses to ensure their country stays number one. In the minds of Americans, who voted for Trump, India is an economic and military minnow, incapable of posing any challenge whatsoever to its leadership. Furthermore, most view India as a natural ally because like America, it, too, is a democracy, which fought for independence and because the Indian diaspora in America has proven themselves in their eyes. In a trade war focussed on containing China, India should be an afterthought.

Why America erected tariffs against India? The US rightly sees China as a threat. Consider that American companies, who want to do business in China, aren’t often granted access to the Chinese market because of the country’s protectionist stance. This view is widely shared by experts across the globe. Foreign companies enter China enthusiastically; yet are forced to retreat when local competitors abetted by the Chinese Government make it impossible for them to do business. China also regularly steals trade secrets from the US and engages in corporate espionage against American companies. It regularly violates patents as well — all of which costs billions to American corporations.

Furthermore, China doesn’t share the liberal values as that of the US. Vast censorship across China, including a ban on Google and Facebook, is clear indication that the Chinese leadership is unwilling to allow its citizens access to information that might pose a threat to its leadership. Also, the Chinese leadership is creating home-grown companies capable of taking on American technology giants. Hence, rather than working alongside the US, as India does, China seeks to compete with America. Trump and those, who elected him to office, understand this well. So it’s understandable why the US put tariffs on China. The latter treats American companies unfairly, manipulates its currency, commits espionage against it, prevents the flow of information to its citizens, has a league of its own on human rights violations and denies its people the right to vote. India grants American companies almost unrestrained access to its market, treats its companies fairly, works with Americans on human rights, helps it fight terrorism, exports its best minds to America and is a democracy. 

America’s decision to impose tariffs on Indian goods when seen in this context is puzzling unless viewed as part of a broader US strategy to ensure American dominance of the globe indefinitely. In history, the rise of a new power has rarely been peaceful. To eliminate any threat to its leadership, the US is leaving no stone unturned. Its removal of Indian exports from the Generalized System of Preferences costs Indian exporters a total of $190 million, a pittance of India’s total exports to America. However, it sends a signal to the world that America is changing. China has already capitulated somewhat to the US’ pressure, as no doubt has India, yet as long as India’s ambitions and those of America remain aligned, there is no reason to believe that the US will impose debilitating tariffs on us. American leadership wants to show there’s a new sheriff in town and things will be done differently from now on. Once all global actors come to terms with this fact and toe the American line, it will normalise trade relations with them, although on its terms.

(The writer is an Advocate, Supreme Court of India)

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