Monday 13 February 2017

FTA: India could be Donald Trump's next trade war target



    India could be Donald Trump's next trade war target 


By David Tweed 

India, Indonesia, Malaysia and Vietnam have largely escaped US President Donald Trump’s glare on trade, but he may yet come looking. The US runs trade deficits with all of them, in some cases quite big ones.
 

Trump’s exit from the 12-nation Trans-Pacific Partnership, his attacks on the trade policies of Japan, China and South Korea, and a Republican push for tax reforms that would impose a levy on US imports from all countries  are contributing to concerns that a protectionist era will hurt growth.
 

Countries that the US runs trade deficits with may be particularly vulnerable to attack. Peter Navarro, the head of Trump’s National Trade Council, and Commerce Secretary-nominee Wilbur Ross last year wrote a paper where they pinpointed America’s trade gaps as a cause for what they described as its “slow growth plunge.” 

“Almost every country in Asia exports somewhere between an awful lot and a lot to the United States,” said Deborah Elms, executive director of the Asian Trade Centre a Singapore-based consultancy. “Trade deficits are a problem. At any moment there could be an angry Donald Trump in your face or a Twitter coming your way. Have other countries woken up to this problem? Perhaps not.”
 

Here is a look at the US' trading arrangements with its main partners in Asia, arranged according to the size of their trade surplus: 

China 
Trade governed by: World Trade Organization rules China was Trump’s main target on the campaign trail. Though he’s threatened everything from punitive tariffs to branding the country a currency manipulator, the president is yet to take any action against what is the US’s third-biggest export market. Perhaps he’s mindful of President Xi Jinping’s warning that a trade war would hurt both sides.
 

Japan 
Trade governed by: WTO rules Prime Minister Shinzo Abe is Asia’s most proactive leader at attempting to ward off Trump’s threats, traveling twice to the US to meet him since his election win. He met Trump in Washington on Feb. 10, where they agreed to begin new talks on trade and investment. Abe then joined the president in Florida for a game of golf. Trump has taken umbrage about the lack of access for US autos in Japan. Abe says the US firms aren’t trying hard enough.
 

Vietnam 
Trade governed by: WTO Rules and a Trade and Investment Framework Agreement. Hanoi had been counting on the passage of the TPP to formalize trade ties with the US The trade surplus represents about 15 percent of Vietnam’s economy, driven by exports of knitwear, furniture and bedding. Exports to the US more than doubled since 2010 as many Chinese factories shifted to Vietnam in search of lower wages.
 

South Korea 
Trade governed by: Korea-US Free Trade Agreement, or Korus, since 2012 Trump called the agreement a “jobs killer” and James Kim, chairman of the American Chamber of Commerce in Korea, says Seoul circumvents the deal with non-tariff barriers. More than 80 percent of the trade gap with Korea for 2016 was in the auto sector, according to the American Automotive Policy Council. South Korea’s Trade Minister Joo Hyung-hwan said last week he’ll seek to explain the benefits of Korus to the Trump administration.
 

India 
Trade governed by: WTO rules, plus a Trade Policy Forum from 2005. Trade has flourished since then, rising to $65 billion in 2015 from $29 billion. India runs a substantial surplus, helped by exports of information-technology services, textiles and precious stones. Despite this, ties between Trump and Prime Minister Narendra Modi have been warm. Modi was the fifth world leader Trump called after his inauguration, and trade issues didn’t come up, according to a readout of their conversation by the White House.
 

Malaysia 
Trade governed by: WTO rules FTA negotiations started in June 2005 but were suspended in 2009 as Malaysia protested US support for Israel during the Gaza War. Malaysia then joined the TPP talks. Malaysia is focusing on trade with the 10-member Association of Southeast Asian Nations, Trade Minister Mustapa Mohamed said this month.
 

Thailand 
Trade governed by: WTO rules, TIFA since 2002 FTA talks started in 2004 and were suspended in 2006 ahead of a military coup in Thailand. The US trade deficit with Thailand is driven by electrical machinery and rubber.
 

Indonesia 
Trade governed by: WTO rules, TIFA since 1996 Indonesia’s trade surplus comes from exports of knitwear, rubber and shoes. The US exports aircraft, soybeans and machinery. The countries last met in April 2016 to discuss trade issues, including ways to improve Indonesia’s intellectual property protection, and proposals for cooperation on issues like unregulated fishing.
 

Philippines 
Trade governed by: WTO Rules, TIFA since 1989 The Philippines may be vulnerable to a proposed “border tax” because its export mix is heavily reliant on electronic and capital goods, which can be easily replaced by US-based producers, according to Credit Suisse Group AG. President Rodrigo Duterte has prioritized trips around Asia to take advantage of trade and investment opportunities in the region, including with China.
 

Singapore 
Trade governed by: FTA since 2004. Singapore can attribute its trade deficit with the US to its status as a financial hub, with big banks, consultancies, law firms and accountants selling services in the city-state. Singapore Airlines Ltd. plans a $13.8 billion order of wide-body airplanes from Boeing Co., which would represent about a quarter of the value of 2015’s total two-way trade. Prime Minister Lee Hsien Loong was an avid TPP supporter, saying last year that ratifying it was a “litmus test” of US credibility in Asia.
 

Hong Kong 
Hong Kong's immediate focus is a trade pact with Asean, with talks starting last year. Another financial hub, it has the largest deficit with the US in Asia. Sales of services by majority US-owned affiliates were $33.8 billion in 2013, according to the US Trade Representative office.
 


Source: ET; 13 Feb 2017

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