Tariff tensions top U.S. agenda in meetings today

Tariff tensions top U.S. agenda in meetings today

Resumption of trade talks hit by U.S. sanctions on Iran, Indian regulatory changes

In the first such formal engagement since the U.S. decided to withdraw India’s preferential trade status in March, a team from the office of the United States Trade Representative will arrive in Delhi on Thursday for meetings with officials of the Commerce and External Affairs Ministries.

Officials on both sides have stressed that the talks are not yet a resumption of the trade dialogue that ended inconclusively after several rounds last year, but are “talks about talks”. They will explore steps to resume dialogue as mandated by Prime Minister Narendra Modi and U.S. President Donald Trump after their meeting last month on the sidelines of the G20 summit in Osaka.

Dialogue derailed

The conversations in Delhi are expected to lay the ground for a meeting between the USTR Robert Lightizer and Commerce Minister Piyush Goyal in the next few weeks, as New Delhi and Washington try to pick up the pieces of the trade dialogue that went off the rails after the U.S. announced a review of India’s Generalised System of Preferences (GSP) status last April.

The final announcement of the withdrawal came on June 1, hours after the Modi government was sworn in for its second tenure.

In retaliation, India imposed higher tariffs on 28 U.S. products, that it had been holding off on since last April.

Trade ties have been further hit by a series of tweets and public comments by Mr. Trump, whose latest tweet on Tuesday called Indian tariffs on American products “no longer acceptable”.

In a Congressional hearing in June, Mr. Lightizer also told members of the House Ways and Means Committee, that the U.S.’s GSP decision was only the first of many possible punitive measures against what he called a “series of problems” with India.

“We are looking at a variety of other unfair actions [by India] that may provoke us to take some other additional action. We made literally no headway on the issues over the course of months and months and months,” Mr. Lightizer said.

‘Sudden’ changes

Apart from higher tariffs on IT products and services and automobile and agricultural products, the U.S. is expected to raise what it calls “sudden” and “unexpected” changes in rules and standards applied in India. The government’s new rules on financial data localisation and e-commerce have upset many U.S. IT and e-commerce companies including Amazon and Walmart operating in India.

In May 2019, the decision of the Directorate General of Foreign Trade (DGFT) to ban biofuels went down badly in Washington.

Another long-standing issue that has defied resolution is the U.S. demand for cargo handling rights for American carriers and courier companies, with India expressing security concerns about the proposal.

Meanwhile, Washington’s sanctions on Iranian oil, Russian military hardware, as well as strictures against dealing with Chinese telecommunication major Huawei have all hardened positions in Delhi.

Indian and U.S. experts say it is unlikely that the two sides will be able to retrace their steps to last year, before the U.S. withdrew India’s GSP status, and will need to now fully rework the trade package.

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