Business Economics & Services Team (BEST)
Indo-US Trade War Hots Up Before Obama Visit
One month before the visit of President Obama to India, the US Inc. has upped its charter of demand to gain market access to India and suggested ways to clean up India's system to attract more investment. The report prepared by US International trade Commission (USITC) has flag marked several grey areas that India should conform to to better its economic relations with the US.
For a long time, the US has been complaining about the balance of trade which is in favor of India by about US$ 17 billion or so. But India's position is that one should not attach too much importance to balance of trade since the bilateral trade volume is only US$ 62 billion, which pales into insignificance going by the volume of trade turnover with China and the EU. In its assertion, India has maintained that once the bilateral trade volume picks up, the US exports to India also will go up significantly, an argument that did not cut ice with the US. The other assertion is that balance of payments, which is the aggregation of all fund flows between the two countries should be the barometer to assess the position, which is reportedly is in favor of the US. In this category, one has to take into account major heads like defense imports, services exports, royalty, tourism, medical, education expenses etc.
The US argument is that unreasonably high tariff coupled with customs procedures that India has, considerably affected its exports to India for items like food products, certain manufactured products etc. Over 60% of the US companies which are doing business with India have to make strategic changes and diverted their business including investment from India, the US trade body alleges. It maintains that it is in the interest of India to make changes in its tariff policy to attract more investment.
The rest of the concerns expressed by the US trade body seems to be a reaffirmation of whatever they have been airing for long such as weak protection of intellectual property rights, such a stiff rules for local value addition, indigenization clause, compulsory licensing etc.
Importantly, India is in a precarious position to respond to some of these concerns. For instance, some of these decisions are not administrative and stem from judicial pronouncements, such as the recent one Bayer, which the Supreme Court of India has upheld the decisions of the lower courts to compulsorily license its products sold in India for kidney and cancer ailments. Also, the US has to bear in mind that there is a strong public opinion building in India against hike in medicines and higher treatment charges. This can disrupt as a strong public outcry that will affect the image of the government. In a country, where medical insurance covers barely 6 to 7 % of population any increase in prices of medicines will have political backlash.
Indo-US Trade War Hots Up Before Obama Visit
One month before the visit of President Obama to India, the US Inc. has upped its charter of demand to gain market access to India and suggested ways to clean up India's system to attract more investment. The report prepared by US International trade Commission (USITC) has flag marked several grey areas that India should conform to to better its economic relations with the US.
For a long time, the US has been complaining about the balance of trade which is in favor of India by about US$ 17 billion or so. But India's position is that one should not attach too much importance to balance of trade since the bilateral trade volume is only US$ 62 billion, which pales into insignificance going by the volume of trade turnover with China and the EU. In its assertion, India has maintained that once the bilateral trade volume picks up, the US exports to India also will go up significantly, an argument that did not cut ice with the US. The other assertion is that balance of payments, which is the aggregation of all fund flows between the two countries should be the barometer to assess the position, which is reportedly is in favor of the US. In this category, one has to take into account major heads like defense imports, services exports, royalty, tourism, medical, education expenses etc.
The US argument is that unreasonably high tariff coupled with customs procedures that India has, considerably affected its exports to India for items like food products, certain manufactured products etc. Over 60% of the US companies which are doing business with India have to make strategic changes and diverted their business including investment from India, the US trade body alleges. It maintains that it is in the interest of India to make changes in its tariff policy to attract more investment.
The rest of the concerns expressed by the US trade body seems to be a reaffirmation of whatever they have been airing for long such as weak protection of intellectual property rights, such a stiff rules for local value addition, indigenization clause, compulsory licensing etc.
Importantly, India is in a precarious position to respond to some of these concerns. For instance, some of these decisions are not administrative and stem from judicial pronouncements, such as the recent one Bayer, which the Supreme Court of India has upheld the decisions of the lower courts to compulsorily license its products sold in India for kidney and cancer ailments. Also, the US has to bear in mind that there is a strong public opinion building in India against hike in medicines and higher treatment charges. This can disrupt as a strong public outcry that will affect the image of the government. In a country, where medical insurance covers barely 6 to 7 % of population any increase in prices of medicines will have political backlash.
