Why is it that US President Donald Trump speaks in admiration of Chinese President Xi Jinping even though the US has the highest trade deficit for 2017 with China — $566 billion — but taunts India for a $22-billion deficit? In his State of the Union address on February 5, Trump emphasised US efforts for a trade deal with China, said he had ‘great respect’ for Xi while earlier he had mocked Prime Minister Narendra Modi when listing India’s developmental aid in Afghanistan.
But the trade deal with China still looks out of grasp as Trump’s March 1 deadline draws closer while the pressure on India grows by the day, through threats like withdrawal of trade benefits under the Generalised System of Preferences (GSP).
This time, it’s said, the provocation has come from India’s decision to go ahead with its ‘toughened’ e-commerce policy, even though US companies affected by this move have found innovative ways to beat the problem — for now. More importantly, both sides had agreed that they will insulate trade negotiations from other commercial policy matters.
Then, why bring in GSP, especially during election year in India? There are many legitimate reasons to be frustrated with India’s tariff levels, its policies and red tape. But New Delhi has also demonstrated more than just intent to address Trump’s trade concerns.
US exports to India have grown at about 28% in the first six months of 2018-19 which is roughly two-and-a-half times faster than Indian exports to the US.
This indicates that the trade deficit, an issue red flagged by Trump, will maintain a declining trend this year. It’s quite possible that India may just drop off Trump’s list of top 10 countries, which have large deficits with the US.Read More