With the United States and China graduating from a war of words to announcing large-scale tariff barriers, the world moved another step closer to a trade war over Thursday and Friday. For India, while the immediate impact from the developments is likely to be muted, any escalation is set to see exports descend into another poor year as global trade volumes fall.
India is likely to be beset with other problems too, if the US sets its sights on India’s own duty structure. Trump has mentioned India along with China several times over the last few months in the context of reciprocal taxes, alleging unfair import duties on American products and violation of WTO export subsidy rules. The US has already pulled up India before the WTO for unfair export subsidies.
India’s trade establishment is pinning its hopes on a compromise being reached, however. “The situation is not yet a ‘trade war’ yet, there’s still time for the two countries to come to a compromise,” a senior industry representative said. The US’ decision to exempt several of its allies like the EU from the earlier Steel and aluminium import tariffs are also raising hopes of a dilution in the stands taken, though India was not one of the countries to receive said exemption.
India must lead in defusing potential trade war: FICCI
India should play a proactive role in defusing the emerging possibilities of a global trade war that can derail the positive outlook in the world trade, FICCI said on Friday.
The industry body observed that protectionist measures by the US have raised serious concerns about a global trade war, highlighting the importance of keeping the World Trade Organisation process intact and also making the multilateral institution stronger.
“India can play a significant role in guiding this exercise to defuse the emerging possibilities of a global trade war that can derail the positive outlook in the world trade,” said Rashesh Shah, President, FICCI.
World is facing serious challenges: Suresh Prabhu
The world is facing serious challenges with the US taking protectionist measures and India has to explore ways to boost exports, Commerce Minister Suresh Prabhu said on Friday.
The US is taking very strong measures against all its major trading partners including China, the minister said.
“If any country takes a unilateral action, we will definitely take note of it and we will deal with it appropriately,” Prabhu said, adding, “It is a reality that the world is facing serious challenges. In this context, we have to increase our exports.” He said the government is taking steps to promote shipments.
Prabhu said India is a firm believer in a rule-based, transparent and participatory trading system and recently it has invited key WTO member countries to discuss ways to reinvigorate the global trading body. He said India would also meet leaders of some African countries to boost exports there.
Tariff skirmishes must be resolved mutually: Das
Taking to Twitter concerns over “tariff skirmishes” between large economies, India’s G20 Sherpa Shaktikanta Das said the issues need to be resolved through mutual engagement.
“Tariff skirmishes between large economies are a matter of concern for global growth. These countries need to analyse whether it really benefits their domestic economy. Such trade issues need to be resolved through mutual engagement,” Das tweeted on Friday.
Tariff skirmishes between large economies are a matter of concern for global growth. These countries need to analyse whether it really benefits their domestic economy. Such trade issues need to be resolved through mutual engagement.— Shaktikanta Das (@DasShaktikanta) March 23, 2018
The US administration has imposed tariffs worth USD 60 billion on Chinese imports to punish the country for its “unfair” seizure of American intellectual property.
India is somewhat insulated from the steel and aluminium tariffs due to its comparatively smaller exposure in the segment, he said in a TV interview, adding that however, India has to keep a close watch on the developments.
Global economic recovery could be hit: Rajan
Economist and former Reserve Bank of India Governor Raghuram Rajan on Friday said the global economy could be hit if the trade war between the US and China escalates.
Insisting that one should stay away from trade war, particularly at a time when the global economy is in the process of recovery, he said, “There are very worrisome scenarios here. I think we should not take this lightly ... I do hope that better sense sort of prevails and we move off from a full-fledged process of one country doing it and the other country reacting and so on.”
Rajan, however, said he wouldn’t recommend usage of the word ‘trade war’, since the countries are not there yet.
“But I do think it is important that we stay away (from such trade barriers) because it could harm the current recovery which has been beneficial across the world significantly,” he said.