India needs to be ready for 'new normal' in global trade: Suresh Prabhu

A day before US trade officials are scheduled to discuss key issues with India, Commerce and Industry Minister Suresh Prabhu said on Monday India would require to be ready for challenges posed to the global trading mechanism, hinting at the recent protectionist measures instituted by the US.
Addressing the Annual Session 2018 of the Confederation of Indian Industry, Prabhu told India Inc that countries that had benefited the most from global trade were resorting to unilateral measures that challenged the global trade mechanism under the World Trade Organization (WTO).

“We are seeing in a way a new normal emerging. The so-called certain system is being questioned, and in that context we must be ready to not only face the challenges but also convert those into an opportunity,” Prabhu said, taking a dig at the US.

US Assistant Trade Representative for South and Central Asian Affairs Mark Linscott is expected on Tuesday for a two-day meet with commerce ministry officials. “While the official agenda of the meet focuses on preparing the ground for the crucial Trade Policy Forum (TPF) meeting to be held between both countries later this year, talks cannot be complete without addressing the recent series of taxes and disputes threatened by the US against trade partners, including India,” a senior official said. India has said it is open to discussions with the US — a strategic partner — on both issues but has assured domestic industry, which is concerned at the rising tariffs in India's largest export destination, that its interests will be protected. “I don’t want to disclose anything, but we work very closely with the US administration so that India’s interests are protected,” Prabhu said.

Minister for Commerce, Industry and Civil Aviation Suresh Prabhu with CII President Shobana Kamineni at a CII event in New Delhi on Monday. Photo: Dalip Kumar

Stakes high for India

For India, steel and aluminium exports to the US remain at barely 2 per cent of the outbound shipments of both products. Raw steel exports to the US stood at only $330 million and exports of finished steel products were worth $1.23 billion in 2016-17. Exports of aluminium and aluminium products stood at $350 million.

But the situation may go out of control if tariffs are raised across the board. India’s export exposure to the US in sectors such as diamond jewellery, pharmaceuticals, and marine products remains far higher than in steel and aluminium. The US consumes 30 per cent of India’s annual jewellery exports and 40 per cent of exports of shrimp and prawn. About 40 per cent of pharma exports are to the US. Merchandise sent to the US, $42.2 billion in 2016-17, account for the highest exported by India. A more pressing issue for India is the case initiated against it by the US at the WTO. The matter relates to targeting promotion schemes providing subsidies to exporters.

“The issue may not be discussed at length at the upcoming meet since WTO cases are discussed at appropriate forums during their duration. But the first formal consultation between both parties will be on April 11,” the official added.

Abhijit Das, head of the Centre for WTO Studies, said: “Timelines for a prohibited subsidy dispute are normally half of those of other disputes. It could extend beyond nine months only if the issue goes for an appeal. We don’t know how the current logjam at the Dispute Settlement Body (DSB) is going to affect it.”

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel