India Not an ‘Abuser’ of Tariffs: GTRI Counters Trump’s Claims

India Not an ‘Abuser’ of Tariffs: GTRI Counters Trump’s Claims

Sub: Eco

Sec: External Sector 

• Former U.S. President Donald Trump’s Statement:
  • Trump recently labeled India as an “abuser” of import tariffs.
  • This echoes his October 2020 statement where he referred to India as the “tariff king.”
  • The Global Trade Research Initiative (GTRI) has called this claim unfair, citing that many nations, including the U.S., use high tariffs to protect domestic industries.
• U.S. Tariff Structure:
  • According to WTO’s World Tariff Profiles 2023, the U.S. imposes high tariffs on several products:
  • Dairy products: 188%
  • Fruits and vegetables: 132%
  • Cereals and food preparations: 193%
  • Oilseeds, fats, and oils: 164%
  • Beverages and tobacco: 150%
  • Minerals and metals: 187%
• India’s Tariff Landscape:
  • India does have high tariffs on certain products like wines and automobiles.
  • However, these do not reflect the overall picture. India’s average tariff rate is 17%, which is higher than the U.S.’s 3.3% but comparable to:
    • South Korea: 13.4%
    • China: 7.5%
  • GTRI argues that focusing only on specific products with high tariffs while ignoring average and trade-weighted tariffs does not provide a complete understanding of India’s trade policies.
• India’s Free Trade Agreement (FTA) Commitments:
  • India has shown openness to free trade by reducing or removing customs duties for imports from FTA partners like ASEAN, Japan, and South Korea.
  • India’s willingness for free trade contrasts with the U.S.’s reluctance to reduce tariffs through FTAs.
• For example, the Indo-Pacific Economic Framework (IPEF) did not include any tariff reductions, highlighting the cautious approach of the U.S.
• GTRI’s Recommendation:
  • If the U.S. is interested in zero-tariff access to India’s market, it should consider negotiating a free trade agreement (FTA) with India.
  • GTRI’s Ajay Srivastava emphasized that India’s average tariffs are not disproportionate when compared to other major economies, and Trump’s claims overlook important contextual factors.

Indo-Pacific Economic Framework (IPEF) – 

• Launched:
  • The Indo-Pacific Economic Framework (IPEF) was launched by the United States in May 2022 to strengthen economic ties and cooperation in the Indo-Pacific region.
• Purpose:
  • The IPEF aims to promote inclusive economic growth and foster economic cooperation among member countries in the Indo-Pacific region.
  • It focuses on addressing global challenges such as supply chain resilience, clean energy, decarbonization, digital trade, and anti-corruption.
• Participating Countries:
  • The IPEF includes 14 member countries, including India, Japan, Australia, South Korea, and other Southeast Asian nations and the 14 partners represent 40 percent of the global GDP and 28 percent of global goods and services trade.
  • It does not involve traditional tariff reduction as in Free Trade Agreements (FTAs).
• Four Pillars of IPEF:
  • Fair and resilient Trade: Focuses on establishing high-standard digital trade rules, labor standards, and cooperation on trade facilitation.
  • Supply Chains: Aims to strengthen and diversify supply chains, ensuring stability and resilience.
  • Clean Energy, Decarbonization, and Infrastructure: Seeks to promote green energy solutions and investments in sustainable infrastructure.
  • Taxation and Anti-Corruption: Addresses issues related to tax policy, transparency, and anti-corruption measures.
• Non-Tariff Focus:
  • Unlike traditional trade agreements, the IPEF does not include tariff cuts or market access commitments, which has made it distinct from other trade agreements like FTAs.

Global Trade Research Initiative (GTRI):

• Purpose:
  • GTRI is a think tank focused on analyzing and providing insights into global trade policies, especially with respect to India’s role in the global economy.
  • It aims to promote an informed understanding of international trade issues, including tariffs, free trade agreements (FTAs), and other economic policies.
• Role:
  • Research & Analysis: GTRI conducts research on global trade dynamics, evaluating tariff structures, trade agreements, and international trade regulations.
  • Policy Advocacy: It provides evidence-based policy recommendations to governments and trade bodies to ensure better trade practices and policies.
  • Trade Insights: GTRI offers insights into trade policies of other countries, helping India and other nations understand the global tariff landscape.