The Donald Trump led administration has dragged India into the World Trade Organization for arbitration on the retaliatory tariffs imposed by India on 28 US goods. WTO is an intergovernmental organization which prepares a framework for global trade and resolves disputes among countries. India imposed the tariffs in retaliation to America’s unilateral tariff on steel and aluminum imports. However, the United States has claimed that Indian tariff is against the WTO norms.
“The US claims that the additional duties, which India imposed through a series of notifications issued between June 2018 and June 2019, are inconsistent with provisions of the WTO’s General Agreement on Tariffs and Trade by unfairly discriminating against US imports vis-à-vis those from other WTO members and by according less favourable treatment to US goods than that provided for in India’s schedule of concessions,” said the official press release by American government.
US has claimed that its tariffs are safeguarded under Section 232 of the US Trade Expansion Act of 1962 which allows the country to impose free trade restrictions on the ground of National security. The Indian side claimed that its tariffs are permissible under WTO’s Agreement on Safeguards.
The action by Trump-led US administration seems to be an act of desperation against an increasingly assertive Modi diplomacy. India, under Modi government, has made it very clear that it would not bow down to Trump’s pressure tactics on trade. India has repeatedly imposed retaliatory tariffs on US goods almost every time Trump tried to do the same. In the face of increasing measures by Trump, PM Modi has refused to back down. One instance of Trump’s provocations was seen during the recent G20 Summit where just before the bilateral meeting between PM Modi and Trump, the US president had tried to intimidate India on tariffs. Undaunted by this, the Modi government stood its ground and after the bilateral meeting with PM Modi, Trump had considerably toned down the rhetoric.
The tough stance PM Modi has demonstrated so far in dealing with Trump on the trade issue has resulted in the kind of desperation that is visible in US taking the drastic measure to drag India to WTO. Especially considering Trump himself had threatened to pull out of WTO last year, calling it ineffective.
For India, the case is strong in the WTO as it has only responded to the tariff increase by the US administration. It is Trump who has continuously been threatening everyone with sanctions and tariff increases. The recent cases include Iran, Russia and the ongoing trade-war with China.
It is important for the US to realize that the times are gone when it used to pressurize developing countries to take decisions as dictated by the American leaders. For decades United States benefited from the free trade rules set by WTO but now as the developing countries like India is ready to reap the benefits of free trade, US wants to change the rules of the game.
The Trump administration has also failed to realize that under the Modi government, India will put its national interest above else and will not be backing down under pressure. During the G20 Summit, before meeting PM Modi at the G20 Summit in Osaka, Japan, US president tweeted, “I look forward to speaking with Prime Minister Modi about the fact that India, for years having put very high Tariffs against the United States, just recently increased the Tariffs even further. This is unacceptable and the Tariffs must be withdrawn!”
However, after meeting PM Modi, a complete change in the tone of Trump was witnessed. He said, “We have never been closer, I can say that with surety… will be discussing trade today.”
As is evident, PM Modi had made it very clear to Trump that India will not be backing down on the trade front and any posturing on tariffs will be met with retaliatory ones. Now, backed into a corner and trying to assure the domestic electorate on keeping up with his charade of ‘tough on unfavorable trade practices, Trump is seeking the WTO’s help in countering PM Modi. This endeavor that is likely to fail and will bring more embarrassment for Trump at the domestic front and international front.