Trade Tirade: Modi, Trump and Two Elections

New Delhi (Sputnik) — A delegation of US trade negotiators led by Mark Linscott has arrived in New Delhi to calm down trade tensions that have been threatening the warm relationship shared by US President Donald Trump and Indian Prime Minister Narendra Modi. The two-day visit is being held against the backdrop of India raising import tariffs on 29 American goods to negate the loss incurred by the Indian industry due to the Trump administration's 10% and 25% hike in tariffs on steel and aluminum, respectively.

READ MORE: India Retaliates: Higher Duties on US Farm, Steel Products Come Into Effect

However, India has delayed the rollout of higher duties until August and stopped short of imposing heavy duties on Harley Davidson motorcycles — an issue raised publicly by Donald Trump on several platforms.

The major issues which are likely to dominate the two-day meeting would be India's eligibility under the Generalised System of Preferences (GSP) program which the Trump administration is reviewing after two petitions filed by American lobby groups — the dairy industry and the medical equipment sector. Both the sectors have been lobbying aggressively after the Narendra Modi government, last year, imposed a price cap on coronary stents and other medical equipment to make health treatment cheaper for ordinary consumers. The price cap on medical devices issue was also mentioned in the National Trade Estimate Report on Foreign Trade Barriers (NTE), an annual report from the US government released in April this year. 

READ MORE: India Readies to Hike Duties on More Items to Hurt America Equally

"India has implemented a wide array of trade barriers that create serious negative effects on US commerce," Erland Herfindahl, the deputy assistant trade representative for the GSP, had said in April. 

According to latest government data, exports from India to the US under GSP rose from $4.58 billion in 2015 to $5.58 billion in 2017.

"The US government has been raising the issue of the price cap on medical equipment for a long time. The Narendra Modi government had taken this decisive step against all odds last year. I do not think there is a miniscule possibility to go back on this," Dr. Ashwani Mahajan, National co-convener, Swadeshi Jagran Manch- sister body of the ruling Bharatiya Janata Party- told Sputnik.

The Narendra Modi government has already slipped into election mode and the issue of the price cap on medical equipment has been widely publicized via radio, print, and television. Modi has also promised farmers that he could improve their income in the next five years and all the government documents suggest that dairy income will play a major role in achieving this goal. In this scenario, it is unlikely that Narendra Modi will heed the US demand for the reduction of imports tariff on American dairy products, which ranges from 30-60%.

"There has been consistency in India's view on dairy and farm products for decades. India will not provide any space to any countries around the world which intended to hurt the farmers," Mahajan added.

Other issues like Intellectual Property Rights and US visas for Indian IT professionals will be discussed at length during the two-day meeting. 

An Indian analyst says that US protectionism too is driven by election pressure.

"One should not be surprised that the current presidency in the US is clearly looking for large-scale protectionism, especially during the run-up to the next elections.  Countries like India need to be watchful and prepare from such measures," Prof NR Bhanumurthy, renowned Indian economist and a professor at the National Institute of Public Finance and Policy in New Delhi told Sputnik.

READ MORE: India to Open Chabahar Port by 2019 Despite US Sanctions on Iran

India now fears that Trump's next target could be country's pharmaceuticals, which in 2016 comprised 16 percent of Indian exports to the US.

The Trump administration has been consistently raising the issue of the widening trade deficit with India, which ballooned to $30 billion last year. Given that the two-day meet is most likely to discuss the way and means by which both the countries can narrow this gap. India's Commerce Minister Suresh Prabhu is hoping that imports of commercial aircraft and natural gas from the US can correct the trade imbalance and pacify the Trump administration.