(Source: BloombergQuint)

Trump Trade Policy Creates Opportunities For India

BloombergQuintOpinion

What should India’s policy be in response to the strongest pressures against free trade in America since Herbert Hoover was President of the United States in the worst years of the Great Depression? This question begs another: what are the features of that trend?

It behooves India to spot four specifics within the trend, which together sum to what India rightly can call the ‘New American Protectionism’ (NAP) and to which India can calibrate thoughtful responses. Taken together, its responses might allow India to claim a compliment given to China since the January 2017 Davos World Economic Forum: promoter of the free trading system.

Now, it’s nothing personal, and there is no accompanying ad hominem tweet to this column. But it so happens the acronym ‘DUMB’ summarizes those features: Decentralized, Un-empathetic, Mercantilist, and Bilateral. This mnemonic device also suggests responses by the world’s largest free market democracy (India, of course). And, it so happens, ‘SMART’ encapsulates them.

Decentralized

Let’s start with decentralized. There are at least six trade negotiators and policy makers, other than the President himself:

  • United States Trade Representative - designate Robert Lighthizer,
  • Commerce Secretary Wilbur Ross,
  • National Trade Council Director Peter Navarro,
  • Treasury Secretary Steven Mnuchin,
  • White House Chief Strategist Stephen Bannon, and
  • White House Senior Adviser and First Son-in-Law Jared Kushner.

Six is up from one. America’s founding fathers enshrined in the Constitution a ‘Foreign Commerce Clause’ (Article I, Section 8, Clause 3) that gives Congress the power to regulate trade. It’s impractical to have 100 Senators and 435 Representatives at a negotiating table. So, they delegate authority to the President to fashion a trade agenda and make deals with other countries, subject to objectives and parameters they set. In turn, the United States Trade Representative (USTR) executes this work, meaning India and the rest of the world normally focuses on the Cabinet-level, Ambassador-rank person holding the position of USTR.

In response, India has to be Savvy. None of the Trump Six is an unabashed free trader, but not all of them are rabid protectionists. The intensity of their ideological entrenchment varies, as do their tolerance levels for imported goods and services, and for Chinese stuff.

If India learns how they divide the Trump Six then India might see constructive ways to rule – that is, to fashion trade rules in its interests.

Note: Let’s not say India plays ‘divide and conquer,’ but rather understand that the Americans are divided, opening an opportunity for India to, well, conquer.

Jared Kushner listens during a meeting with Wilbur Ross and Donald Trump at the White House in Washington, D.C. on February 2, 2017.(Photographer: Drew Angerer/Pool via Bloomberg)
Jared Kushner listens during a meeting with Wilbur Ross and Donald Trump at the White House in Washington, D.C. on February 2, 2017.(Photographer: Drew Angerer/Pool via Bloomberg)

Un-empathetic

Forget about progress in the World Trade Organization (WTO) on the multilateral trade issue of greatest importance to India, namely, public stockholding for food security. None of the Trump Six articulates concern about reforming the non-trade distorting ‘Green Box’ of subsidies permissible under the WTO Agriculture Agreement to allow India to stockpile grains as a hedge against food deprivation. Indeed, forget about WTO progress on other trade issues that India cares about, such as a special safeguard mechanism (SSM), which is a temporary trade remedy for import surges of foreign commodities.

Marketing is the way India should respond to un-empathetic American trade policy. Not marketing its merchandise, but its ideas.

As it did in the 1960s and 1970s leading a coalition of non-aligned countries, India today needs to be a preeminent, non-partisan voice on food security.

India was blamed for the collapse of Doha Round negotiations over the SSM in July 2008, and again crucified in WTO Ministerial Conferences such as Bali in December 2013 for holding out in favor of an indefinite ‘Peace Clause’ to immunize it and other developing countries against lawsuits about their public stock-holding programs. The ultimate consensus was a four-year grace period. There is no need to query whether the Trump Six will fix the Green Box in a way India can accept in time for the Buenos Aires Ministerial Conference in December 2017, when this period ends. They won’t.

Yet, Easter 2017 is an auspicious occasion for India to resurrect its image, from COO (Chief Objectionable Obstructionist) to CEO (Chief Empathetic Officer). India needs to market through the world’s media a scrupulously researched case that connect these dots:

  • Famine and/or food insecurity plague 70 million people across 45 countries.
  • War, conflict, climate change, and fisheries depletion exacerbate the plague and imperil the lives of hundreds of millions across the Middle East, North Africa, and Asia.
  • Trade can help alleviate food pressures if rules allow food surplus countries to develop public stockpiles of rice and wheat for domestic and foreign emergency assistance programs without exposing those countries to WTO lawsuits.
  • Green Box reform is the place for those rules.
  • Without Green Box reform, food shortages will cause even greater waves of migration to hit developed country shores, and foment ever more virulent extremists to work out terrorist plots.

When the acronym ‘NFIDC’ figures nearly as prominently as ‘NAFTA’ in American trade policy, then India will know the efficacy of its marketing. The WTO counts 79 Net Food Importing Developing Countries, and neighbors Bhutan, Bangladesh, and Pakistan are among them – but only trade cognoscenti know the acronym.

A worker checks the quality of wheat outside a trader’s store at the New Grain Market in Karnal, Haryana, India, on May 19, 2016. (Photographer: Prashanth Vishwanathan/Bloomberg)
A worker checks the quality of wheat outside a trader’s store at the New Grain Market in Karnal, Haryana, India, on May 19, 2016. (Photographer: Prashanth Vishwanathan/Bloomberg)

Mercantilist

Via Executive Order 13786 of March 31, 2017, President Trump commanded his Six to target trading partners with which America has a sizeable bilateral trade deficit. India is on the list, a list premised on pre-Adam Smith, pre-David Ricardo mercantilism:

  • A government should intervene to encourage exports and discourage imports;
  • Bilateral trade surpluses lead to export revenues exceeding import expenses;
  • These net revenues can be channeled (through further government intervention) into export-oriented industries and a sea-lane-protecting navy.

Mercantilism casts imports as evil, necessary only if merchandise imported is unavailable at home, or needed from periphery commodity producing countries as inputs for high-value added industries in the center of the trading system. Indian cotton and Manchester textiles of yesteryear, or Chinese steel and American pipelines of today, come to mind.

The Trump Six must follow the Order by deploying every available device to knock down bilateral trade deficits. Indeed, the second of the Two Great Trump Trade Commandments is Executive Order 13785 (also dated March 31) about vigorous trade remedy prosecution, meaning aggressive enforcement of anti-dumping (AD) and countervailing duty (CVD) investigations, especially against bilateral surplus countries.

The TraPac LLC shipping terminal stands at the Port of Los Angeles in Los Angeles, California, U.S. (Photographer: Tim Rue/Bloomberg)
The TraPac LLC shipping terminal stands at the Port of Los Angeles in Los Angeles, California, U.S. (Photographer: Tim Rue/Bloomberg)

Adjudication is India’s answer to the two Orders. India needs to take cases to the WTO, as China, the European Union, Japan, and Korea long have, against any controversial American practices in AD and CVD investigations of Indian exports. Nothing – not the dumping margin calculation, not the injury determination, not the subsidization rate computation, not the use of evidence including so-called ‘facts available’ – should escape Indian scrutiny. That does not mean India should argue every last point as if preparing an AD-CVD case were like planning a wedding.

Rather, India needs to focus its legal talent on the vital substantive parts of the court ceremony.

Namely, those wherein America might have behaved unfairly in administering its unfair trade remedy laws against fairly traded Indian merchandise with which American producers can, and should, compete.

Bilateral

Forget about the WTO as a negotiating forum to achieve a grand multilateral bargain. The Doha Round is dead, and commercially meaningful pluri-lateral deals like the Trade in Services Agreement (TISA) and Environmental Goods Agreement (EGA) are moribund. For the Trump Six, bilateral deals are the best way to make American again.

Hong Kong residents walk past balloons which are part of protests against the World Trade Organization’s Sixth Ministerial Conference in a park in Hong Kong, China on December 14, 2005. (Photographer: Lucas Schifres/Bloomberg News)
Hong Kong residents walk past balloons which are part of protests against the World Trade Organization’s Sixth Ministerial Conference in a park in Hong Kong, China on December 14, 2005. (Photographer: Lucas Schifres/Bloomberg News)

Here, India’s response is Regionalism. India should proceed with ambitious free trade agreements (FTAs) across the Asia-Pacific region. The starting point – not necessarily to demand of its FTA negotiating partners, but as a benchmark for the highest level of ambition yet attempted – should be the Trans-Pacific Partnership (TPP). Some TPP chapters may work as loose templates. Others may be political non-starters. India can proceed in a variety of venues, broadening and deepening its engagement with China through the Regional Comprehensive Economic Partnership (RCEP), and sounding out the TPP 11 (EBA – Everyone But America) for talks.

What about the final letter in India’s potential ‘SMART’ response? ‘T’ is for ‘Transparency.’ One reason President Trump could so easily withdraw from TPP was that misinformation about the deal easily filled the informational void from inception in 2008 until completion in 2015. By the time the secret text was published in November 2015, what it actually said did not matter. Single-issue based opposition was too entrenched to allow a fair and balanced reading of the entire deal weighed for the common good.

The world’s largest free market democracy can avoid replicating that mistake by being transparent about its SMART response to a DUMB NAP. And, when it publishes draft proposals for comment, India can build a comparative advantage in handy, trade policy acronyms.

Raj Bhala is Associate Dean for International and Comparative Law and Rice Distinguished Professor, The University of Kansas, School of Law. The views expressed here are his and do not necessarily represent the views of the State of Kansas or the University.

The views expressed here are those of the author’s and do not necessarily represent the views of BloombergQuint or its editorial team.