Trade War Benefits For India | Burning Issue

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US-CHINA TRADE WAR

The tariffs on $200 billion worth of products comes on top of the $50 billion worth already taxed earlier this year, meaning nearly half of all Chinese imports into the United States will soon face levies. Bringing the total to $250 billion The next wave of tariffs, which are scheduled to go into effect on Sept. 24, will start at 10 percent before climbing to 25 percent on Jan. 1.

WHAT DOES CHINA DO NEXT?

China had already gone blow for blow with the United States on tariffs on more than $50 billion of each other’s goods this year. But its options for responding further are getting increasingly complicated.
The White House warned Monday that it would respond to any retaliation from Beijing with yet more tariffs on roughly $267 billion of Chinese exports. That would mean the US measures effectively cover all the goods China sells to the United States each year (the total for 2017 was about $506 billion).
China has a smaller target to aim for in response: it bought around $130 billion of US products last year, according to US government figures.

BEIJING’S ‘VERY DIFFICULT’ DECISION

Analysts have suggested that after Beijing runs out of US goods to target, it could go after major American companies that do business in China, such as Apple and Boeing. China has a track record of such behaviour, including making life difficult for South Korean firms because of a political dispute last year with South Korea’s government over a US missile defence system.

HOW INDIA’S EXPORTS MAY BENEFIT

India can capture the Chinese commodity market vacated by US exports in the face of the higher import duties Beijing has slapped on them. In fact, the study has analysed and identified at least a hundred products where India can replace US exports to China, which totalled around $130 billion last year.

SO MUCH INDIA CAN GAIN

If Indian exports can successfully capture the US’ share of the trade pie, the massive bilateral trade gap with China will also come down. In the last fiscal, India’s exports to China stood at Rs 86,015 crore, while Chinese imports totalled Rs 4.91 lakh crore. In other words, the trade deficit was well over Rs 4 lakh crore.

ADVANTAGE INDIA

The good news for India is that while China has imposed tariffs of 15-25% on these goods coming from the US, other countries are subject to only 5-10% duty – the most favoured nation (MFN) rate applicable for members of the World Trade Organization.

ADVANTAGE INDIA

Moreover, India has been granted additional 6-35% duty concessions on the MFN under the Asia Pacific Trade Agreement, which makes Indian exports all the more competitive at present.

ASIA-PACIFIC TRADE AGREEMENT

The Asia-Pacific Trade Agreement (APTA), previously known as the Bangkok Agreement and renamed 2 November 2005, was signed in 1975. It is the oldest preferential trade agreement between countries in the Asia-Pacific region. Seven Participating States- Bangladesh, China, India, Lao PDR, Mongolia , Republic of Korea, and Sri Lanka are the parties to the APTA.

DOUBLING INDIA’S EXPORTS

Interestingly, Union Minister of Commerce & Industry Suresh Prabhu had chaired a meeting of different exports stakeholders and ministry officers to discuss a strategy for doubling India’s exports by 2025. The study could serve as a blueprint to getting there.

CHEAPER OIL TO INDIAN SHORES

China is the largest buyer of US crude and gas in Asia. But its biggest trading house has already stopped buying US crude and Beijing looks set to slap retaliatory tariffs on US crude and LNG. A boycott of US oil indicates Beijing’s continued purchase of Iranian oil, keeping Tehran in play in the global oil market.

NOTES

India may enjoy a better bargaining power to argue for a US waiver as it will be the only big buyer of US crude in Asia after South Korea. This will also help moderate the impact on crude prices, something that has been worrying policymakers.
The expected paring of India’s imports from Iran after this month and the increase in purchases from the United States also raise questions about the politics of oil.