Tariff Wars/Conflicts (Part 2)
By
Dr H A C Prasad
The effect of the two phases of tariff escalations by the US on India as given in our study for India Exim Bank are given in the table.
Thus, due to the Phase 1 tariff escalations, average weighted tariffs for all US imports from India increased from 3.05 percent in 2017 to 3.27 percent in 2018. Further tariff escalations in Phase 2 resulted in average weighted tariffs increasing to 3.54 percent in 2019.
The Impact of these tariff escalations are also reflected in the fall in US imports from India of Phase 1 tariff escalation items, namely steel and aluminum from Q2 of 2018 in the aftermath of the imposition of tariffs on steel items and hike in tariffs of aluminum items by US. In the case of Phase 2 tariff escalation (due to withdrawal of GSP by US from India and also applicability of duty on Solar cells as a result of withdrawal of GSP) since June 2019, there is a deceleration in growth of US imports from India in Q2 and Q3 2019.
While now there is a talk of Special Bilateral Agreement between India and the US ,we had already suggested this in our India Exim Bank Study. Infact, to counter the effects of removal of GSP by USA, India can have a Special Trade Dispensation with USA in which it can ask for duty concessions for all items out of GSP. Alternatively, India can ask US to include it under GSP for some important items particularly those manufactured by MSMEs.
Meanwhile, India is giving concessions to many LDCs. However, India is out of GSP of USA while these countries continue to enjoy GSP with USA and compete against India! It is high time that India withdraws some of these concessions to LDCs as some of the LDCs like Vietnam and even Bangladesh are very competitive in some items. India needs to add a graduation clause to some of the LDCs and a sunset clause on concessions for some items. In the case of Bangladesh, it is hightime that we review afresh all the concessions given.
