US Secretary of Commerce Wilbur Ross was due to visit India for talks on Thursday as storm clouds gather over a trading relationship worth about $125 billion a year. He canceled his trip late Wednesday.
“Due to inclement weather, technical problems that led to the cancellation of his flight, and other logistical issues, Secretary Ross regrets he is no longer able to attend … in person,” a Commerce Department spokesperson said.
“He intends to participate in most of the sessions remotely and thanks our private sector and the government of India hosts for their continued partnership as we further strengthen the ties between our two countries.”
Harleys and whiskey
“India is a very high tariff. They charge us a lot of tariffs,” he said at a White House event.
The Generalized System of Preferences (GSP) program gives 121 developing countries easier access to US consumers. India was the biggest beneficiary in 2017, according to US government data.
$20 billion deficit
One of Trump’s goals has been to cut America’s trade deficit. India exported goods worth more than $50 billion to the United States last year and imported US products worth about $30 billion, according to the US Census Bureau.
Modi, on the other hand, wants to attract more foreign manufacturers into India. Anything that makes it harder to access the US market could scare them away just as Modi begins campaigning for a second term.
“The removal of trade concessions to the US could have further implications such as reducing the attractiveness of India as a manufacturing hub,” said Jason Yek, country risk analyst at research firm Fitch Solutions. “This could weigh on the inflow of foreign direct investment over the coming years.”
The United States Trade Representative declined to comment on India’s potential removal from the GSP, and India’s Ministry of Commerce did not respond to requests for comment.
“I think partly it could be construed as negotiation strategy, you raise the pitch in the run-up to the actual talks,” said Rajat Kathuria, director of the Indian Council for Research on International Economic Relations, a think tank.
“We’ve grown out of the developing country threshold that provided us conditional access to that system,” he said. “We may be able to get it one more time, or a couple more times, but I think the writing is on the wall,” Kathuria said.
Amazon and Walmart feel the pain
Restrictions on two of America’s biggest companies could serve as another major sticking point in trade talks.
Amazon has pledged to invest more than $5 billion in its India business, while Walmart paid $16 billion last year for Flipkart, India’s biggest online retailer. Both companies have pushed back against the new rules, but their requests for more time to comply were rejected by the Indian government under pressure from local business owners.
Finding a solution
While tensions continue to mount between Delhi and Washington, the United States may be reluctant to spark another trade war after months of friction — and tariffs worth billions of dollars — on China.
“I don’t think they’re going to escalate the situation to the point that they have done with China,” said Kathuria. “India has to be a collaborator and partner with the United States.”
And the US-China trade war gives India an extra incentive to avoid a fight.
“If there’s going to be a spillover from China to other markets to access the US market, then India is well placed to exploit whatever slack there is because of the trade war,” Kathuria said.