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Amid Buzz of Section 301 Tariffs, US Hopes PM Modi Will Have Freer Hand to Pursue ‘Tough’ Economic Reforms

Under Section 301 of the Trade Act of 1974, the administration can take action, including tariffs, to counter another nation's policies that restrict US commerce.

PTI

Updated:June 8, 2019, 6:10 PM IST
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Amid Buzz of Section 301 Tariffs, US Hopes PM Modi Will Have Freer Hand to Pursue ‘Tough’ Economic Reforms
File photo of Prime Minister Narendra Modi with US President Donald Trump. (PTI)

Washington: The White House is hopeful that Narendra Modi in his second term as prime minister with a strong mandate will have a freer hand to pursue some of the tough economic reforms that will help create a more business-friendly environment, a senior official has said.

His comments came as the US media on Friday reported that India could soon become the next target of President Donald Trump's aggressive policy, including launching the so-called Section 301 investigation against India.

"There's concern that recent restrictions adopted by the Indian government on e-commerce and data localisation have negatively impacted US companies and the overall investment climate," a senior White House official told PTI on condition of anonymity.

"The United States is hopeful that, with the election over, Prime Minister Modi will have a freer hand to pursue some of the tough economic reforms that will help create a more business-friendly environment and encourage new foreign investment," the official said.

Modi and Trump are scheduled to meet later this month in Osaka, Japan during the G-20 Summit.

While no structured bilateral meeting has been planned yet, Modi and Trump would have a tri-lateral summit with Japanese Prime Minister Shinzo Abe.

Trump, who looks at every bilateral relationship from the prism of economy, has for about a year now publicly expressed his displeasure over the status of India-US economic relationship, in particular, the alleged high tariffs by India.

In the past several months, he has called India a "tariff king" and threatened to impose reciprocal tariffs on Indian products as well.

Immediately after Modi was sworn in for second term, Trump informed the US Congress of his decision to terminate India's designation as a beneficiary developing nation, under the key GSP trade programme, after determining that it has not assured the US that it will provide "equitable and reasonable access to its markets."

The Generalised System of Preference (GSP) is the largest and oldest US trade preference programme and is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.

The US media reported that India could soon become the next target of Trump's aggressive policy after China and Mexico.

"The next step is expected to be launching a full-blown investigation into India's practices, just as the US did with China last year," Politico reported on Friday.

Under Section 301 of the Trade Act of 1974, the administration can take action, including tariffs, to counter another nation's policies that restrict US commerce. Trump has invoked that previously little-used provision to impose or threaten tariffs on virtually all goods imported from China, the report said.

"What happened with China is a road map for what you could see in India," one business source close to the issue was quoted as saying by Politico.

A senior State Department official identified trade as a reason for the bilateral tension.

"India remains one of the least open major economies in the world. The Trump administration is committed to ensuring free and fair and reciprocal trade. We have prioritised working with the government of India to ensure that US companies have a level playing field, the official told a group of reporters last week.

"The persistent market access issues," the official explained. "Now the task is how do we look ahead? How do we work under the second Modi Administration to identify a path forward?" the official said.

According to the senior State Department Official, who spoke on condition of anonymity, the Trump administration believes that there is enormous potential to grow India-US trade relationship and to help stimulate the jobs that Modi is committed to bringing to an overwhelmingly young Indian population.

To make any progress, the Trump administration wants Modi Government to address several policies, including data localisation and e-commerce measures.

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