Home Contact Us  

US & South Asia - Articles

Print Bookmark Email Facebook Subscribe
#5181, 15 November 2016

US Policy Orientation

Trump's Trade Scenarios: Implications for India
Amita Batra
Professor of Economics, Centre for South Asian Studies, School of International Studies, JNU, & Columnist, IPCS

The year 2016 has sprung many a surprise, not the least of which has been the outcome of the US presidential elections. The economic policy stance of the president-elect Donald Trump has been evident in his oft-repeated ‘inward-looking’/isolationist pronouncements in the course of the election campaign. These though, have not been substantiated with any policy detail for a serious analysis. Much commentary therefore remains in the realm of speculation. There is, however, no doubt that the globalisation engendered inequities have been at the heart of Trump’s economic policy declarations. Expectations of a reversal of some of the earlier trade agreements and policies may therefore not be entirely misplaced.

If the expression of an aversion to trade as reflected in the pre-election speeches was to turn into reality then it is possible that the largest trading economy becomes more protectionist in its trade policy. The core elements of trade policy as specified in the course of the election campaign include imposition of higher tariffs on imports from China and Mexico specifically, and a general increase in tariffs otherwise. Mega regional trade agreements such as the Trans Pacific Partnership (TPP) will in all likelihood not be taken forward. Trade agreements in general seen as instruments of unfair concessions breeding inequities may also be subject to re-negotiation; the intention of building a wall between the US and Mexico being most symptomatic of this impending trend. There have also been indications of a US pull-out from the multi-lateral rule making trade organisation, the World Trade Organisation (WTO), in case there is any resistance to its imposition of protectionist policies. Other stated intentions have been with regard to changes in immigration policies with a more restrictive visa regime. The broad objective of the policy changes being bringing manufacturing back to the US, greater employment and hence greater prosperity, and in the process, recovery of losses in global trade for the US economy, in particular vis-à-vis the Chinese economy. 

As has been predicted by many analysts already, any attempt by the US economy towards the use of protectionist instruments will be countered by retaliatory measures by other economies, including China, with the likely impact being serious in terms of not just the initiation of a trade war with China but that of applying brakes to international trade in general. The WTO has already expressed concern at the slowdown of world trade in 2016 as the pace of growth has been slower than that of the global economy, unlike the trend over the last decade and a half. The US being the world’s largest importer with a share of almost 14 per cent in world imports, the imposition of higher tariffs will naturally be detrimental to world trade. In addition, the US economy may not gain as the attempt to push domestic manufacturing may imply higher costs and inefficient production, as long established comparative advantages will be altered in the process. While aimed at some, costs of the re-adjustment may be spread across to other economies as well. India, for example, will find it difficult for its ‘make in India’ programme to yield substantive benefits in such an adverse global trade environment. Higher tariff walls will be detrimental to manufacturing exports. As the largest export market for India with a share of 15 per cent in India’s total exports in 2015-16, higher tariffs in the US may prove to be a difficult hurdle for India to surmount and to convert its potential comparative advantage through the ‘make in India’ initiative into higher exports.

The US is also a major destination for India’s IT, ITeS and BPO services exports. Together, these accounted for US$ 82 billion-worth of exports in the financial year ending in March 2015, according to the Reserve Bank of India (RBI) data. If Trump, again as per the campaign rhetoric against immigrants, decides to adopt a restrictive H-1B visa regime, India’s existing comparative advantage in the services sector would be diluted.

The pull- out from the mega regional trade agreement, the TPP, may have multiple effects on the Asia Pacific trade architecture. It is likely that the Regional Comprehensive Economic Partnership (RCEP) agreement, which is seen as an alternative trade configuration to the TPP for the Asian economies, including India, may now emerge as the main trade agreement for regional economies. The higher trade standards (WTO plus) of the TPP, it is possible, will now be sought in the RCEP by those economies that are members of both the RCEP and TPP. India, with its persistent stance of differentiated tariff liberalisation offers to the RCEP economies, may then find negotiations more difficult. In the absence of the US-led agreement from the region, there may even be the possibility of China acquiring a pre-eminent position not just in the RCEP but also in the Asia Pacific region, to the extent of pushing forward its own proposal of a Free Trade Area of the Asia Pacific (FTAAP). In fact, in the absence of the US counter, the China-led FTAAP - first proposed in the 2014 APEC meeting -may even become the lead trade configuration in the Asia Pacific region. India may have to rethink its strategy for participation in the regional trade architecture if this APEC members’ configuration gains traction in the near term. India is not yet a member of the APEC. 

A possible alternative, though, to accepting Chinese leadership in global and/or regional trade deals, would be a return to the multilateral system and the rise of the WTO, where it may be difficult for China to emerge as the dominant player. This may even be a favourable outcome for India, a longstanding WTO loyalist. But for this, the WTO needs to reassert itself as the international body that deals with trade issues in a more inclusive manner. Given the dragging of the Doha Development Agenda (DDA) now for a decade and a half, this seems like a humongous task. But if developing country coalitions comprising the more dynamic economies could pave the way, this may just be the time for a resurrection of the WTO and the DDA. And, India could actually take the lead in this process.

Print Bookmark Email Facebook Subscribe
IPCS Columnists
Af-Pak Diary
D Suba Chandran
Resetting Kabul-Islamabad Relations: Three Key Issues
Can Pakistan Reset its Relations with Afghanistan?
The New Afghanistan: Four Major Challenges for President Ghani
Big Picture
Prof Varun Sahni
Understanding Democracy and Diversity in J&K
When Xi Met Modi: Juxtaposing China and India
Pakistan?s Tactical Nuclear Weapons: The Inevitability of Instability

Dateline Colombo

Asanga Abeyagoonasekera.
Sri Lanka: Moving Towards a Higher Collective Outcome
The Importance of Electing the Best to our Nation's Parliament
Sri Lanka: Toward a Diaspora Re-Engagement Plan
Dateline Islamabad
Salma Malik
Pakistan's Hurt Locker: What Next?
IPCS Forecast: Pakistan in 2015
India-Pakistan Relations in 2015: Through a Looking Glass
Dhaka Discourse
Prof Delwar Hossain
IPCS Forecast: Bangladesh in 2015
18th SAARC Summit: A Perspective from Bangladesh
Bangladesh in Global Forums: Diplomacy vs. Domestic Politics
Eagle Eye
Prof Chintamani Mahapatra
India-US: Significance of the Second Modi-Obama Meet
Has President Obama Turned Lame Duck?
Modi-Obama Summit: Criticism for Criticism?s Sake?

East Asia Compass
Dr Sandip Mishra
India-Japan-US Trilateral: India?s Policy for the Indo-Pacific
China-South Korea Ties: Implications for the US Pivot to Asia
Many ?Pivots to Asia?: What Does It Mean For Regional Stability?
Himalayan Frontier
Pramod Jaiswal
Nepal?s New Constitution: Instrument towards Peace or Catalyst to Conflict?
IPCS Forecast: Nepal in 2015
Constitution-making: Will Nepal Miss its Second Deadline?

Prof Shankari Sundararaman
IPCS Forecast: Southeast Asia in 2015
Indonesia's Pacific Identity: What Jakarta Must Do in West Papua
Modi in Myanmar: From ?Look East? to ?Act East?
Sushant Sareen
IPCS Forecast: Pakistan in 2015
Islamic State: Prospects in Pakistan
Pakistan: The Futility of Internationalising Kashmir

Looking East
Wasbir Hussain
Myanmar in New Delhi's Naga Riddle
China: ?Peaceful? Display of Military Might
Naga Peace Accord: Need to Reserve Euphoria
Maritime Matters
Vijay Sakhuja
Indian Ocean: Modi on a Maritime Pilgrimage
Indian Ocean: Exploring Maritime Domain Awareness
IPCS Forecast: The Indian Ocean in 2015

Nuke Street
Amb Sheelkant Sharma
US-Russia and Global Nuclear Security: Under a Frosty Spell?
India's Nuclear Capable Cruise Missile: The Nirbhay Test
India-Australia Nuclear Agreement: Bespeaking of a New Age
Red Affairs
Bibhu Prasad
Countering Left Wing Extremism: Failures within Successes
Return of the Native: CPI-Maoist in Kerala
The Rising Civilian Costs of the State-Vs-Extremists Conflict

Regional Economy
Amita Batra
India and the APEC
IPCS Forecast: South Asian Regional Integration
South Asia: Rupee Regionalisation and Intra-regional Trade Enhancement
South Asian Dialectic
PR Chari
Resuming the Indo-Pak Dialogue: Evolving a New Focus
Defence Management in India: An Agenda for Parrikar
Pakistani Taliban and Al Qaeda in Afghanistan: Implications for Asian Security

Spotlight West Asia
Amb Ranjit Gupta
Prime Minister Modi Finally Begins His Interaction with West Asia*
A Potential Indian Role in West Asia?
US-GCC Summit: More Hype than Substance
Strategic Space
Manpreet Sethi
India-Russia Nuclear Vision Statement: See that it Delivers
Global Nuclear Disarmament: The Humanitarian Consequences Route
Nasr: Dangers of Pakistan's Short Range Ballistic Missile

The Strategist
Vice Admiral Vijay Shankar
Jihadi Aggression and Nuclear Deterrence
The Blight of Ambiguity
Falun Gong: The Fear Within

OTHER REGULAR contributors
Gurmeet Kanwal
Harun ur Rashid
N Manoharan
Wasbir Hussain
Rana Banerji
N Manoharan

Ruhee Neog
Teshu Singh
Aparupa Bhattacherjee
Roomana Hukil
Aparupa Bhattacherjee


Browse by Publications

Issue Briefs 
Special Reports 
Research Papers 
Seminar Reports 
Conference Reports 

Browse by Region/Countries

East Asia 
South Asia 
Southeast Asia 
US & South Asia 

Browse by Issues

India & the world  
Naxalite Violence 
Suicide Terrorism 
Peace & Conflict Database 
Article by same Author
19th Party Congress: Understanding the Economics in Xi’s Speech

India's Trade Options

Pakistan’s Economy: Significance of MSCI Elevation and FTSE Inclusion

G20 Summit 2016: A Lost Opportunity?

GST: Facilitating India’s Domestic, Regional and Global Integration

Brexit Consequences: Complexities and Uncertainties

Changing Regional Contours and Imperatives for India

India and the APEC

IPCS Forecast: South Asian Regional Integration

South Asia: Rupee Regionalisation and Intra-regional Trade Enhancement

18th SAARC Summit: An Economic Agenda

Regional Economic Architecture: Is India Ready?

Y! MyWeb
Print Bookmark Email Facebook Subscribe
Year 2018
 January  February
 2017  2016  2015  2014  2013  2012  2011  2010
 2009  2008  2007  2006  2005  2004  2003  2002
 2001  2000  1999  1998  1997

The Institute of Peace and Conflict Studies (IPCS) is the premier South Asian think tank which conducts independent research on and provides an in depth analysis of conventional and non-conventional issues related to national and South Asian security including nuclear issues, disarmament, non-proliferation, weapons of mass destruction, the war on terrorism, counter terrorism , strategies security sector reforms, and armed conflict and peace processes in the region.

For those in South Asia and elsewhere, the IPCS website provides a comprehensive analysis of the happenings within India with a special focus on Jammu and Kashmir and Naxalite Violence. Our research promotes greater understanding of India's foreign policy especially India-China relations, India's relations with SAARC countries and South East Asia.

Through close interaction with leading strategic thinkers, former members of the Indian Administrative Service, the Foreign Service and the three wings of the Armed Forces - the Indian Army, Indian Navy, and Indian Air Force, - the academic community as well as the media, the IPCS has contributed considerably to the strategic discourse in India.

Subscribe to Newswire | Site Map
18, Link Road, Jungpura Extension, New Delhi 110014, INDIA.

Tel: 91-11-4100-1902    Email: officemail@ipcs.org

© Copyright 2018, Institute of Peace and Conflict Studies.