Mixed trade expectations from Trump administration

His stated position on multilateral deals might derail TPP, to India's advantage

India has mixed expectations on trade with a Donald Trump presidency. 

He has a clear position on existing and proposed multilateral trade agreements. After vociferously denouncing the ambitious Trans Pacific Partnership between the US and 11 other Pacific Rim nations, chances of the mega trade deal being ratified now look slim. 

If it passes, textile manufacturer Vietnam and information technology outsourcing powerhouse the Philippines get access to the high-value American market. Our domestic textile industry relies on exports and has been worried.

“Of India’s $40-billion of textile export, $9 billion goes to the US. If Vietnam gets greater market access, this figure will see a decline of $2-3 billion,” says economist Atul Mishra from the Confederation of Indian Textile Industry.

The US might also renegotiate the North American Free Trade Agreement, which Trump claims has cost the country hundreds of billions of dollars worth of investment and took away millions of jobs. Most of these jobs were in the manufacturing sector, which Trump is electorally committed to strengthening.

While this would be a tough task, it is set to affect manufacturing powerhouse China. So far in 2016, the Asian mega manufacturer has exported $337 billion of goods to the US. As compared to this, the US exported $79 billion of goods to China. Trump has latched on to such data thorough his poll campaign to foment opposition towards China. 

This might mean a benefit for India at China’s expense, say trade experts. However, they add that US is also expected to actively bring down its trade deficit, which would have its own impact on India. America is our second largest trading partner and largest export destination, with total bilateral trade at $109 billion a year; both sides are committed to increase this to $500 billion. Of this, merchandise trade was $62 billion in 2015-16, with exports to the US at $4.3 billion and imports $21.8 billion.

“We expect the Trump administration to act strongly on trade issues,” a senior government official said, on condition of anonymity. Lateral entry into senior governmental positions, common in the US, will mean the Trump administration will be bringing its own personnel to fill key posts. It will take some time before contact can be set up with these people,” the official added. 

Since Trump has not made his position clear on a number of other issues, India needs to sift through his rhetoric to guess his stance. Issues expected to continue are market access and lowering of tariffs. 

At the India-US Trade Policy Forum  last month, the Indian government pushed for more market access for our agricultural export and better institutional mechanisms to improve food export. The US asked us to consider relaxing the local sourcing norms in single-brand retailing, aimed at helping American companies.

That country’s Generic Drug User Fee Act and Food Safety Modernisation Act have created an elaborate system of inspection and high inspection fees, affecting smaller exporters, commerce minister Nirmala  Sitharaman has said.

Foreign direct investment from the US was $4.2 billion in 2015-16, up from $806 million in 2013-14.