Trump Bringing Asian Rivals On The Same Page

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JASMEET WARAICH

It may seem trivial to compare a trade war to a real one, but trade war comes with potentially serious and unpredictable results as well — especially when Trump is involved. And even beyond that, it could preview how Trump might conduct himself in actual military conflict, in which his tendency to retaliate and counterpunch with increasing force would be highly consequential.

Trump announced Thursday that he would impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum ones. The announcement was made despite the reservations of advisers and of top congressional Republicans, and there is a broad sense that it will stoke a trade war with China and others.

 

Washington imposed new tariff on solar panels, aimed mainly at China. In addition, Trump aides are weighing broad trade and investment penalties against China as they complete a detailed study accusing Beijing of widespread theft and expropriation of American intellectual property

 

A month of whirlwind diplomatic efforts by China did little to deter President Donald Trump from escalating his trade offensive, an indication of the rocky road ahead for the world’s two largest economies.

The U.S. trade move comes at an inopportune time for Beijing, just ahead of the annual session of the Chinese legislature and as President Xi Jinping’s top economic adviser, Liu He, is in Washington to meet with economic officials.

In January, Washington imposed new tariff on solar panels, aimed mainly at China. In addition, Trump aides are weighing broad trade and investment penalties against China as they complete a detailed study accusing Beijing of widespread theft and expropriation of American intellectual property.

Narendra Modi and Donald Trump. © Reuters

In response to the U.S. decision on solar panels, Beijing started an investigation into imports of U.S. sorghum, worth $1 billion a year to U.S. farmers, a key Trump constituency. Chinese trade experts and U.S. business representatives say future retaliation will also likely target industries and regions seen as supportive of Mr. Trump.

The diplomatic scramble has yielded little substantive progress, though with Mr. Liu, continuing his meetings with U.S. officials, a breakthrough could still come.

On the other hand, the US has dragged India to the WTO’s dispute settlement mechanism over export subsidies, saying these incentives were harming American companies, prompting the government to state that it would engage with the Trump administration and explain its position.

The US challenged India’s export subsidy programmes such as Merchandise Exports from India Scheme in the World Trade Organization (WTO), asserting that these initiatives harm its companies by creating an uneven playing field.

They have sought consultations with India under the aegis of the global trade body’s dispute settlement mechanism.

Observing that the US has dragged India under a provision of WTO’s Agreement on Subsidies and Countervailing Measures, Article 27 of the same pact also provides for special treatment to developing countries.

At the time the agreement came into force, developing countries with over $1,000 per capita gross national income (GNI) were provided a period of eight years to bring down their export subsidies.

 

US has dragged India to the WTO’s dispute settlement mechanism over export subsidies, saying these incentives were harming American companies, prompting the government to state that it would engage with the Trump administration and explain its position

 

India has stated that the WTO informed the country only in 2017 that it has crossed this threshold and hence should get the eight-year period from 2017 to cut its exports subsidies.

Under the pact, developing countries can seek further extension of the eight years grace period by providing cogent arguments.

The US in its statement said that thousands of Indian companies are receiving benefits totaling over Export subsidy programmes: the Merchandise Exports from India Scheme; Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware Technology Parks Scheme; SEZ; Export Promotion Capital Goods Scheme; and duty free imports have been challenged by US Trade Representative (USTR) Robert Lighthizer at WTO.

The USTR said these “apparent” export subsidies provide financial benefits to Indian exporters that allow them to sell their goods more cheaply to the detriment of American workers and manufacturers.

Through these programmes, it said India provides exemptions from certain duties, taxes, and fees; reduces import duty liability; and benefits numerous Indian exporters, including producers of steel products, pharmaceutical, chemicals, IT products, textiles, and apparel.

Export subsidies provide an unfair competitive advantage to recipients, and WTO rules expressly prohibit them, it added.

India has already lost two cases in WTO against the US – poultry and solar sector.

In 2016, India also dragged the US to WTO against the policies of eight American states for the renewable energy sector, alleging that the domestic content requirement norms are inconsistent with global trade rules.

A certain level of cooperation is required between the two for a balanced flow of trade.

Lastly, it can be said that Trump’s trade policies which are recently going against China and India might be responsible for bring the two on the same page. ■

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