The Donald Trump administration has been unhappy with the Indian government over certain economic issues for some time now. But the announcement by the US that it intends to withdraw GSP (General System of Preferences) trade benefits to India has actually surprised us. The US gives preferential treatment to India and some other countries through this provision and sets zero tariffs for some goods from these nations. It is being said that the US move can affect Indian exports worth $5 billion. India’s official stand is that this will not cause any major impact on exports (say, affect merely $190 million in exports). However, the option is open for India to impose retaliatory tariffs on the US, which it has been postponing for several months. All said and done, this action by the US will not help relations between the two great nations.
There are many reasons for America’s displeasure, but they are all linked to the economic interests of US companies. The immediate reason is that India has curbed the discounts given by US e-commerce firms Amazon and Walmart (which recently acquired Flipkart). They had been burning huge amounts of money and giving heavy discounts, putting small traders out of business.
Before this, the US was also upset with India for not acceding to its demand of tweaking its patent laws to favour American pharma companies. The US actually wanted tweaking of Article 3(d) of the Indian Patent Act, to allow ever-greening of patents, not permissible now under Indian laws. India rejected this demand to protect public health. It was clarified by the then Minister of Commerce Nirmala Sitharaman that India’s patent law is in accordance with international agreements and there is no scope for change in the same.
Some time ago when the Indian government decided to cap the prices of coronary stents and knee implants, US companies were annoyed. These firms have been trying for a long time to remove the caps, so they can continue to charge arbitrary prices, but the Indian government was not prepared to oblige them. India has also been taking steps to curb exploitation of farmers by Monsanto, an US agricultural company. Price control has now been applied to Monsanto’s BT cotton seeds to help farmers. The US administration is also demanding that India should remove the condition that only the milk of vegetarian cows be imported from US. It is notable that in the US, cows are fed with blood and meat, and import of milk from such cows is prohibited in India.
The US is trying to arm-twist the Indian government and get concessions for its corporations. But this would not be in the best interests of the Indian people—our farmers, traders and others. Therefore, if the Indian government bends, it would not send a good signal to our people and the world. The US also understands that it will not get anything suddenly by exerting pressure on our government. But perhaps America believes that after the elections, the government may concede to US pressure.
Some say that after the terrorist attack in Pulwama, India desperately needs international cooperation in its endeavour to teach a lesson to Pakistan. India has in fact got this support from the international community in the last few weeks. The US, France, Russia and Britain played a major role in denouncing this terrorist attack in the UN Security Council, due to which even China could not act against it. Some believe that for diplomatic reasons, India should not annoy the US, but it is equally true that accepting the inappropriate demands of any country, no matter how powerful it might be, is not advisable for any sovereign nation.
America’s allegation that India imposes higher duties on US products and so hurts its exports is actually not true. In fact import duties imposed by India are as per the WTO agreements. Rather, India imposes much lower duties on imports coming from the US than what is permissible under WTO, and our applied rates of import duties are actually one-fourth of the bound rates. So we can say that even if we raise tariffs by four times, it would not be in violation of WTO agreements. If the US pressurises India to reduce tariffs, it goes against the letter and spirit of WTO agreements.
If the US ask us to change our patent laws to suit the requirements of their companies to allow them to earn unreasonable profits, that too is against WTO agreements. In fact, experts say our patent law is exemplary and that it not only complies with WTO, but also helps protect our public health.
So far as India’s curbing of discounts by foreign investment recipient e-commerce companies is concerned, our aim is to guard the interests of crores of our small traders and MSME entrepreneurs, whereas America wants us to help Amazon and Walmart.
So America’s demands are unreasonable and it wants to bully India. Today when the US has already decided to withdraw GSP benefits to India, it’s an opportunity for us to take appropriate aggressive measures in national interest to protect public health, employment and agriculture. We should not forget that the US imposed economic sanctions against India after the Pokhran nuclear tests. At that time India didn’t even ask the US to revoke economic sanctions. Rather, it withdrew the same under the influence of their companies. Today our economy is much stronger than what it was in 1999. So we need not worry about American action.
Ashwani Mahajan
Associate Professor, PGDAV College, University of Delhi
Email: ashwanimahajan@rediffmail.com