WASHINGTON – US businesses and diplomats are pressing India to cut tariffs,industry and government sources say, after New Delhi’s move to increasecustoms duties on dozens of products to help its flagship Make-in-Indiadrive aggravated differences over trade.
Ford, which has two plants in India, has sought a reversal of the newtariffs on auto components, while Apple Inc is concerned its iPhones havebecome even more expensive in the price-conscious $10 billion smartphonemarket.
India and the United States have built close political ties and PrimeMinister Narendra Modi was in Washington last summer, bear-huggingPresident Donald Trump in his personalized style of diplomacy. But tradefriction is casting a shadow.
A US State Department spokesperson told Reuters India must lower tradebarriers, which were holding back economic ties.
Trump has already called out India for its duties on Harley-Davidsonmotorbikes, and this month Modi ordered them cut to 50 per cent from 75 percent for high-end bikes.
But that has not satisfied Trump, who pointed to zero duties for Indianbikes sold in the United States, saying he would push for a “reciprocaltax” against countries, including US allies, that levy tariffs on Americanproducts.
“It is important that India make greater efforts to lower barriers totrade, including tariff and non-tariff barriers, which will lower prices toconsumers, promote development of value chains in India,” said the StateDepartment spokesperson, referring to Trump’s comments on motorbikes.
The US Congress has been pushing over the past year for greater pressure onIndia to dismantle economic barriers, and now House Republicans have raisedthe issue of the new round of duties with New Delhi.
“We conveyed our concerns to the Indian government last week to raisingtariffs above WTO rates – especially as it relates to informationtechnology,” a Republican aide told Reuters.
India announced higher import tax on electronics products such as mobilephones and television sets in December, and then on 40 more items in thebudget this month. These included goods as varied as sunglasses, juices andauto components.
India says the move is aimed at giving local industry the chance to growand is part of a broader plan to lift the share manufacturing makes up ofGDP to a quarter, from around 15 percent, and create the tens of thousandsof jobs needed for a young workforce.
US commerce department referred questions to the US Trade Representative’s(USTR) office, where a spokesman declined to comment.
The Indian commerce ministry did not respond to a request for a comment onthe US criticism of the import taxes.
But a senior finance ministry official defended the decision to raiseduties, saying it reflected a trend in other parts of the world.
“When all the major economies, including the US and China, are followingprotectionist policies, why are we being questioned,” the official said.
Bilateral trade between India and the United States has grown to about $115billion in 2016 from $20 billion in 2001. The United States buys close to afifth of India’s goods and services exports and its trade deficit haswidened from $13 billion in 2006 to $31 billion in 2016.
The USTR’s office is “fairly negative” on India at this point and isanalyzing the impact of the customs trade tariffs on various Americancompanies, an industry source aware of the matter told Reuters.
“They are more vigilant than earlier, they are in bulldog mode underTrump,” the source said. A spokesperson for the USTR’s office declined tocomment.
Even before the new round of hikes, India has been seen as one of the mostprotected major economies. The United States had an average tariff rate of3.4 percent on imported goods in 2016. compared with 13.5 percent forIndia, according to the World Trade Organisation (WTO).
China, which the Trump administration is targeting for its trade practices,had an average tariff rate of 9.9 percent that year.
Apple, whose top-end iPhone costs nearly $1,700 after the company raisedprices twice in recent months due to higher duties, is in talks with otherfirms on whether the issue could be raised at the WTO, an industry sourcesaid.
Apple did not respond to a Reuters request for comment.
Ford and European carmaker Volkswagen have written to Indian FinanceMinister Arun Jaitley saying the new tariffs are going to hurt the autosector and should be reviewed, sources said. – Agencies