Much like China has done for several years, India is engaging in deliberately misleading rhetoric when it comes to international trade.
In public announcements, India touts a largely hands-off approach to regulation as it relates to trade policy. But in reality, India pursues protectionist policies that often deny American producers reasonable access to its market with its “Make in India” initiative, which was launched in 2015.
The purpose of the “Make in India” initiative is to entice global companies to invest in India and build manufacturing facilities there. But at the same time, it discourages global companies from actually selling their products in India.
American companies that want to export to India face significant trade barriers (including high import tariffs). According to the most recent data from the World Trade Organization (WTO), the average “bound” tariff rate is about 48 percent (a “bound” rate means the WTO doesn’t normally allow this rate to go any higher). However, many tariff rates are quite a bit higher. Coffee and raisin exporters face a 100 percent tariff. India’s tariffs for alcoholic beverages are even worse at 150 percent. Tariffs on textiles are twice as bad as alcohol at 300 percent. Specific food products and live animals have faced an outright ban since 2006.
Trade barriers like these are more indicative of isolationism than they are protectionism. I think it’s safe to say that California won’t be selling many of its raisins to India, and American brewers won’t be selling much beer there, either.
And then there’s automobiles and motorcycles. Generally, the tariff rate on these products ranges from 60 percent to 75 percent. But according to a March 1, 2017, Wall Street Journal article that highlighted India’s Central Board of Excise and Customs website, India applies 100 percent tariffs on Harley-Davidson motorcycles exported from the United States. Consequently, Harley-Davidson opened up an assembly plant in India in 2010 to avoid the sky-high import tariffs.
Protectionist policies like these helped to make India the number one destination for foreign direct investment (FDI) in 2015, eclipsing China, which was the top destination for FDI for several years.
India’s trade barriers have finally caught the attention of influential members of Congress such as Sen. Bob Corker, R-Tenn. In a 2016 congressional hearing on relations between India and the U.S., Corker said, “There remain a number of challenges … including our economic and trade relationships, onerous and unreasonable localization requirements, high tariffs, limits on foreign investment and unparalleled bureaucratic tape, red tape, hinder further access to the Indian market by American businesses.” Corker also noted that “…the hopeful rhetoric has far exceeded actual, tangible achievements.”
Countries like India often announce future plans to liberalize their economies that never materialize. This is exactly how these protectionist foreign countries “play” with free trade countries like the United States. They know that this kind of rhetoric will work to keep our market open to essentially unlimited imports while we continue to wait for them to open their protectionist markets to us.
We do, of course, want friendly ties and cooperation with other countries as much as possible, but we also need to look out for our own economic interests. Sen. Vince Hartke, D-Ind., who served alongside Rep. Gerald Ford, R-Mich., in the U.S. Congress in the early 1970s, once said, “Our economy cannot be dismantled to make the rest of the world happy.”
We should no longer tolerate excessive barriers to our exports from countries like India, which often result in U.S. trade deficits.
To open India’s market to American products, we need to do one of two things: Either convince India to lower its import tariffs to the level of the free trade-obsessed United States, or raise tariffs on imports from India to level the playing field and make trade fair for our domestic producers. Anything less amounts to unfair trade that harms American workers and American industries. Thousands of American jobs and hundreds of millions of dollars in much-needed U.S. tax revenue are at stake.