Govt, exporters hope USTR goes slow on retaliatory levy

NEW DELHI: The government and exporters are hoping that the US Trade Representative (USTR) goes slow on the proposed retaliatory tariff on 40 items, including basmati rice, shrimps and several gems and jewellery products, in response to India’s digital service tax (DST).
The US has indicated that it may not rush ahead with the move against India, although it has sought public comments. Although the extent of duty collected through a 2% levy will add up to around $55 million annually, the damage will be assessed by the USTR as part of the investigation. Experts believe it is bad optics considering that India the US are strategic allies but are yet to clinch a deal to sort out earlier action and retaliatory measures.
The action came days after Catharine Tai was sworn in as the new USTR and had a virtual meeting with commerce and industry minister Piyush Goyal. Last year, US had started a probe against India and several other countries for imposing DST.
Exporters are cautious on their assessment. “If the US goes ahead with the move, it will have a dampening effect on Indian exports. It is discriminatory tariff, especially when Indian exporters are competing with others for the same products. But the impact will depend on the extent of the duty imposed. If it is 2-3%, exporter may be able to absorb it. But it will sure hurt them if the tariff is 15-20%,” said Ajay Sahai, director general of Federation of Indian Export Organisations.
Others are seeking a multilateral solution to the issues, something that is being debated at international forums such as OECD. “While Retaliatory tariffs can hamper the interests of SMEs and consumers both in India and US, a possible action by India will create a rollerball effect. Tax challenges in digital economies are not just limited to India but will involve many countries soon, and hence a multilateral approach by the way of dialogues should be considered,” industry lobby group Trade Promotion Council of India said.
The USTR move reiterates that countries do not change their policies despite the change of leadership, said trade experts.
Given the tough bargain that US is known for, it is unlikely to settle for a deal without extracting concessions in return, especially when the finance ministry, which had imposed the levy, has failed to convince India’s key trading partner on the issue.
For the last two years or so, India is hoping to address US concerns, ranging from price control on medical devices IPR to e-commerce and export promotion schemes, while also negotiating a deal that will see both countries open up their markets for each other for products ranging from apple to technology products.

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