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View: Stop whining, Mr President

For Indian millennials, the US President's trade tantrums may sound jarring. But this circus has been in town before.

, ET Bureau|
Last Updated: Feb 23, 2020, 07.47 PM IST
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'They've been hitting us very hard for many, many years,' complained US President Donald Trump, speaking about India at a 'Keep America Great' rally in Colorado last week. 'They give us tariffs, one of the highest in the world is India.'

A week before that, the Trump administration declared India a 'developed economy', snuffing out any hope of any early reversal of its decision to terminate trade preferences to a developing India. For Indian millennials, the US President's trade tantrums may sound jarring. But this circus has been in town before.

There was once a lady called Carla Hills, a predecessor of United States Trade Representative (USTR) Robert Lighthizer. Hills threatened India with 'Super 301' and 'Special 301', US legislation that imposes trade sanctions in response to what it regards as unfair trade practices. That was Ronald Reagan’s United States.

There was a senator called Lloyd Bentsen, who campaigned to become vice-president in the 1988 US elections. He, too, held forth against not just the likes of India, but also Japan and Germany. ‘Foreigners can sell in an open American market, but we are not being able to sell them but a pittance. I don’t think those things are fair and I don’t think we need to roll over and play dead,’ said Bentsen, then chairman of the US Senate Finance Committee.

The US did not play dead. The Soviet Union did. The US enjoyed a unipolar moment, and created new rules for global trade through the creation of the World Trade Organisation (WTO). India resisted the attempt, but fell in line, cut its tariffs steeply, accepted rules pertaining to intellectual property rights (IPR), and so on.

That was supposed to be about free trade being fair. But that was not before the US threatened the likes of Japan with ‘voluntary export restraints’ (VERs) and Super and Special 301. The Europeans huddled together and created a single market. China was smarter. It stooped to conquer, and became the manufacturing workshop of the world.

A US that began to lose its competitive edge voted to power a bluff and bluster politician, who has promised to ‘make it great again’. The rhetoric of the late 1980s is back.

It’s actually an even older strain in the political polemics of the US. The distinguished trade economist Jagdish Bhagwati called it ‘reciprocitarianism’ in his and D Irwin’s 1987 essay, ‘The Return of the Reciprocitarians: US Trade Policy Today’, published in The World Economy. A consequence, he said, of the ‘diminished giant syndrome’ afflicting the US in the 1980s. That syndrome, too, is back.

Everything President Trump says about tariffs and fair trade now, President Reagan did before -- and after him did Carla A Hills, the USTR of President George Bush Sr. But, as Bhagwati points out, the British conjured up the ideology of free trade and switched to pleading for fair trade when it suited them.

Trump is only echoing what the defender of the British empire, Joseph Chamberlain, had said in the last days of the Victorian era, ‘We are losing our foreign markets, because whenever we begin to do a trade, the door is slammed in our faces with a whacking tariff... [A]s if that were not enough, these same foreigners who shut us out, invade our markets and take the work out of the hands of our working people and leave us doubly injured.’ This was, and Bhagwati and Irwin quotes Chamberlain saying, ‘unfair and one-sided’!

There is no need for India to get too flustered with Trump’s trade tantrums. India has been buying defence equipment, civilian aircraft and energy (oil and gas) and energy equipment (nuclear) from the US. The trade debate between US and India has missed the wood for the trees.

It is not about dairy products, cashew nuts, motorcycles or stents. The history of USTR bullying on trade has been a history of pocketing a concession and seeking another, of shifting focus and talking tough. The US now seeks to damn with praise, calling India ‘developed’. That’s no way to treat a friend.

The criticism at home and overseas of the tariff policy pursued by the Narendra Modi government has some merit. But the WTO-compliant tariff hikes are not aimed at the US. Indian industry’s major concern remains China, with whom India has a trade deficit that is far bigger than the trade surplus it enjoys with the US.

A bigger economy must work to offer a smaller economy more favourable terms of trade. By that yardstick, China must reduce its trade deficit with India, and the US should stop complaining about its deficit with India.

India, for its part, must seek to reduce the trade surplus it enjoys with many of its smaller neighbours, despite following a policy of asymmetric trade liberalisation in their favour.

Rather than engage the US on its terms, India should point to how it is helping ‘Make America Great Again’. Four million Indians are working hard -- in schools, colleges, offices and laboratories to ‘Make America Great Again’. Indian brain power is fuelling the US economy. Someone ought to calculate its value.

Surely, India would then be seen to be running a huge trade deficit with the US. Stop complaining, Mr Trump.

The writer is distinguished fellow, Institute for Defence Studies & Analysis, United Service Institution of India, New Delhi
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