Wait...
  1. Home >
  2. Export Import News >
  3. Business News >
  4. Trade war: India can gain in the long term – Here is how >
  5. Trade war: India can gain in the long term – Here is how

Online Export Import Data Search

Complete Training Video : Click Here

Trade war: India can gain in the long term – Here is how.


Date: 06-12-2018
Subject: Trade war: India can gain in the long term – Here is how
The ceasefire announced by the US and China on mutual escalation of tariffs at the G20 Summit at Buenos Aires might only be temporary. It is also not clear if they will withdraw the tariffs they have already raised. These tariffs have begun hurting countries and businesses. At the same time, there are also opportunities that might arise for several countries, including India.

One of the expected outcomes of the US-China tariffs and counter-tariffs is that both would look to source imports from elsewhere. This is inevitable as their respective imports become more expensive. Nomura’s study on the import-substitution impact of more than 7,000 trade items subjected to tariffs in the US-China trade-spat points to Malaysia, Japan and Pakistan as the likely largest beneficiaries of import-substitution. Prospects of greater sourcing from India are relatively less. Several Southeast Asian countries—Thailand, Philippines, Vietnam, Indonesia and Cambodia—are also expected to benefit more than India. This is largely due to the nature of imports that have been subjected to tariffs by the US and China.

US exports of food, beverages and vehicles to China have been the hardest hit, while Chinese exports of electrical equipment, appliances, components and machinery to the US have been similarly affected. Most of these items are manufactured products, which are largely assembled and rolled out from Southeast Asia, Japan and Taiwan. It is hardly surprising therefore that import-substitution by large markets like the US and China would benefit these countries.

India’s limited chances of benefitting through import substitution are from likely Chinese efforts to shift to alternative cheaper sources of agricultural imports. India might emerge as a potential location for greater import of soybean by China, though the bulk of such ‘new’ imports might be sourced from Brazil and Argentina. An industry-specific impact study of US tariffs against China by Fitch Solutions highlights these possibilities. It also notes the difficulties for China’s agri-business supply chains that are dependent on US imports. For India, this could be an opportunity for negotiating with China for greater market access of some more of its agricultural exports. Relaxation of quality barriers by China for rice and fish oil exports from India points to the increasing leverage it has obtained with China in agricultural exports. It can be capitalised further.

India, though, can be a bigger beneficiary of the US-China trade-spat in the long term. Assuming the tariffs that have been imposed are maintained by the US and China, both countries would gradually witness greater relocation of supply chains. Businesses, seeking to avoid tariffs while exporting from China to the US, and vice-versa, would have incentives to export to these countries from other locations. In this regard, Nomura’s findings on production relocation possibilities point to greater benefits for India. Indeed, while Vietnam tops the list of Asian countries likely to benefit from long-tern relocation of final product assembling, India follows after Vietnam, Malaysia and Singapore.

What explains the difference in India’s prospects between short-term import-substitution and long-term business relocation? A part of it is obviously in the nature of industries that are likely to be relocated. Automobiles are a good example. If India can succeed in keeping tariffs low on vehicles it exports to the US, it can expand as a hub for export-oriented auto assembling. It can similarly benefit as a centre for electrical and electronic equipment, once some of these are relocated from China. At the same time, however, Vietnam and Malaysia are clearly ahead of India in snatching more of the relocation, because of their lower costs and better infrastructure.

In the short-term, import substitution efforts would be on getting cheaper alternative imports, irrespective of locations. These would be driven by efforts of state agencies to procure from options worldwide. But longer term production relocation decisions would be taken by transnational businesses, after long hard looks at specifics of various locations. Countries with relatively poor business rankings might suffer. South Asian countries are lagging behind in this regard. More specifically, when it comes to parameters reflecting progress in trade facilitation resulting in lowering of trade costs, South Asia as a region has a long way to go. But India has recorded improvements. Compared with a ‘hot’ investment location like Vietnam, which is ranked overall at 69 in ease of doing business whereas India is at 77, India fares better in the indicator of ‘trading across borders’ (80 for India, 100 for Vietnam). If the improvement is sustained then India can effectively compete with Vietnam in emerging as an important relocation spot.

At this stage, though, much of the expectations would depend on the prolongation of the trade war and India’s ability to keep reducing trade and domestic business costs. India’s benefits from the trade war are in the longer term and it has to prepare for the long haul.

Source: financialexpress.com

Get Sample Now

Which service(s) are you interested in?
 Export Data
 Import Data
 Both
 Buyers
 Suppliers
 Both
OR
 Exim Help
+


What is New?

Date: 13-12-2018
NOTIFICATION No. 57/2018-Customs (ADD) New
Seeks to levy definitive anti-dumping duty on the imports of "Uncoated Copier Paper" originating in or exported from Indonesia, Thailand and Singapore.

Date: 12-12-2018
Circular No. 52/2018-Customs
Revision of All Industry Rates (AIRs) of Duty Drawback

Date: 06-12-2018
Circular No. 50/2018-Customs
Clarification with respect to amendments to Customs and Central Excise notifications for EOUs - reg.

Date: 06-12-2018
Public Notice No. 57/2015-20
Errata to Public Notice No.50/2015-2020 dated 26th November, 2018 notifying procedure for allocation of quota for import of (i) Calcined Pet Coke for use as Calcined Pet Coke (CPC) in Aluminum Industry and (ii) Raw Pet Coke for CPC manufacturing industry.

Date: 06-12-2018
A.P. (DIR Series) Circular No.16
Exim Bank's Government of India supported Line of Credit of USD 500 million to the Government of the United Republic of Tanzania

Date: 06-12-2018
Notification No. 96/2018 - Customs (N.T.)
Exchange Rates Notification No.96/2018-Custom(NT) dated 06.12.2018

Date: 05-12-2018
Notification No. 1/2018-Central Excise (N.T)
General Bond (Form B-17) to be executed by the EOUs

Date: 05-12-2018
Notification No. 79/2018-Customs
Amendment to notification no. 52/2003-Customs dated 31.03.2003 -reg.

Date: 05-12-2018
NOTIFICATION No. 23/2018-Central Excise
Amendment to notification no. 22/2003-CE, 23/2003-CE & 24/2003-CE all dated 31.03.2003 -reg.

Date: 05-12-2018
NOTIFICATION No. 23/2018-Central Excise
Amendment to notification no. 22/2003-CE, 23/2003-CE & 24/2003-CE all dated 31.03.2003 -reg.



Exim Guru Copyright © 1999-2018 Exim Guru. All Rights Reserved.
The information presented on the site is believed to be accurate. However, InfodriveIndia takes no legal responsibilities for the validity of the information.
Please read our Terms of Use and Privacy Policy before you use this Export Import Data Directory.

EximGuru.com

C/o Infodrive India
E-2, 3rd Floor, Kalkaji Main Road
New Delhi - 110019, India
Phone : 011 - 40703001