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Hello from DC again! This week we look ahead to Donald Trump’s visit to India next Monday, where a limited trade deal may (or may not) be signed.
In other news, the US trade representative’s office chose late on a Friday evening to drop the news that it would increase tariffs on plane imports. It held back from bumping up tariffs on cheese, wine and other delicious imports, though, much to the relief of European officials (and all of us who live in DC).
Our Person in the News this week is Lord Elgin, of Elgin Marbles fame, as Greece, among other nations, has persuaded the EU to add a “Marbles” clause to the draft of the bloc’s demands for a post-Brexit trade agreement. Meanwhile, the chart of the day highlights the rise in US duties collected from imports over the year to January, according to new figures released last week by the administration.
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Restoration of preferential trade terms would be a big prize for India
Donald Trump is making the first visit of his presidency to Delhi next Monday. White House and state department aides will no doubt be hoping that he keeps any boasting of his dealmaking prowess strictly in the realm of the trade (mini) deal.
Last summer, Trump caused dismay in Washington and chagrin in Delhi when he offered to step in and help solve the decades-old territorial dispute between India and Pakistan over Kashmir — a move seen as a foreign policy faux pas from a sitting US president. Moreover, Trump’s claim that Indian prime minister Narendra Modi asked him for help on the issue was swiftly — and embarrassingly publicly — contradicted by Delhi, which has long insisted that it will talk directly about Kashmir only with Islamabad, with no foreign help required, thank you.
On the subject of trade, though, Trump’s much-vaunted dealmaking impulses might serve him better. Trade watchers in Washington are cautiously hoping a limited trade deal could be signed by Modi and Trump as part of the visit. Drafts of a deal are being exchanged, according to a person familiar with the talks, while Robert Lighthizer, the US trade representative, had multiple calls with his Indian counterpart last week. It’s still not clear whether something could be signed on Monday — but even a mini-deal could ease growing trade tension between the two countries.
Trade woes began in earnest in 2018 with US tariffs on steel and aluminium, which hit India hard and prompted it to file a series of retaliatory duties with the World Trade Organization (which it did not levy until last year). The US obsession with trade deficits has also pained Delhi. At $23.3bn in 2019, India has only the 11th largest trade deficit with the US, but has still come under pressure to reduce it. This has perplexed Indian officials, who argue that the deficit is paltry compared with China’s.
The US’s seemingly punitive withdrawal of preferential trade terms from India last summer twisted the knife into the trading relationship. After public consultation, the Trump administration removed India from the Generalized System of Preferences, or GSP, list — that let it sell goods duty-free into the US on account of it being a developing economy.
US officials argued that, to be on the list, a country has to provide “equitable and reasonable” access to its markets for US companies — something they said India did not provide. India quickly hit back, applying retaliatory tariffs it had lodged with the WTO on 28 US products, including apples, walnuts and almonds.
So what might progress look like? If any sort of deal is finalised next week, the thorniest issues will probably be ignored, as ever. The big prize for India is the restoration of its preferential trade terms. To achieve this, US officials will probably argue that America should see benefits equivalent to the same value, either through tariff reduction or an Indian pledge to buy more America-manufactured goods.
The latter option is easier: India has increasingly been buying US weapons, with a breakthrough security agreement signed in late 2018 unlocking sales of high-tech military equipment. It has bought about $15bn worth of equipment over the past decade, and more talks are under way. It could in theory promise to buy more liquid natural gas from the US too, allowing Trump to claim a win for an industry he is keen to boost.
Purchase pledges aside, US trade watchers are expecting a compromise on a tussle over duties on medical devices. Indian price controls on coronary stents and knee implants have irked American companies, which have been complaining that Indian regulators also blocked them from immediately withdrawing their products from the market in response to those tariffs. In a report, US trade officials said this left manufacturers selling their products at a loss for a year and a half.
Extra agricultural access to the Indian market is high on the US wishlist, but it is unclear whether this can be resolved through only a limited deal. The US wants better access for its dairy goods in particular, but for religious and cultural reasons India requires that cattle are fed only vegetarian food. American milk and dairy producers were among those agitating for India’s removal from the GSP list.
Intellectual property, data localisation rules and ecommerce regulations that discriminate against foreign companies are among the hard-to-resolve issues, and unlikely to end up on a list of easy wins. The US is concerned about India’s tough patent laws, as well as demands that companies operating there store data on local servers.
The US and India have significantly boosted their military co-operation in recent decades as Washington searches for regional allies in countering China © Prakash Singh/AFP/Getty
But despite the difficulties, the US is trying to make headway given India’s geostrategic importance. The countries have significantly increased their diplomatic and military co-operation in recent decades as Washington searches for regional allies in countering China.
US officials have said Trump will visit India regardless of whether there is a deal to sign, but big new purchase commitments will be high on the White House wishlist.
Watch this space.
Charted waters
Tariff coverage widened in September to include a wide range of consumer goods. Trump’s approach on trade has been a yo-yo-like alternation between confrontation and conciliation — the former designed to display toughness and force concessions, with the latter aimed at soothing the markets and keeping business hopeful that agreements can be reached. But the president’s trade wars have not been “easy to win”.
Person in the news
The Elgin Marbles were removed from Athens and shipped to England by Lord Elgin in the early 19th century © Matthew Fearn/PA
Who is it?
Lord Elgin, former British ambassador to the Ottoman Empire.
Why are they in the news?
Greece, among other nations, has successfully persuaded the EU to add an “Elgin Marbles” clause to the draft of its demands for a post-Brexit trade agreement.
The Elgin Marbles, also known as the Parthenon sculptures, were removed from Athens and shipped to England by Lord Elgin in the early 19th century, and are now housed at the British Museum in London.
Greece has demanded their return since it gained independence in 1832. As recently as January, Greek culture minister Lina Mendoni said Britain’s exit from Europe might help create the “right conditions” for the “permanent return” of the sculptures.
The clause does not mention the sculptures specifically, and says only that both sides “address issues relating to the return or restitution of unlawfully removed cultural objects to their countries of origin”. Greek authorities have denied news reports that return of the statues was a condition of a trade deal. A spokesperson for the UK government said the artefacts were the legal responsibility of the British Museum. “That is not up for discussion as part of our trade negotiations,” said the spokesperson.
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