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Bloomberg
14 hours ago
- Business
- Bloomberg
A Guide to Trade Talks, Trump-Style: Is His Unorthodox Approach Working?
One of the most ambitious international trade agreements of the past half century, the Uruguay Round was also one of the most complex. At nearly 300,000 pages of legal text, the deal took eight years to hammer out, spanning three US presidencies and leading in 1994 to the establishment of the World Trade Organization. The WTO's rules have brought more order to international commerce and a steady reduction in trade barriers that helped to boost the volume of global trade by 4% every year since the Geneva-based body was founded. To President Donald Trump, however, America's trading partners have swerved or gamed the WTO rules, maintaining many barriers to the import of US goods, creating new ones and 'ripping off' the world's biggest economy in the process. The plan for his second term in office is to ditch the old, consensual approach to trade negotiations and level the playing field through strength and coercion, imposing hefty tariffs on goods from nations that sell more to the US than they buy in return. The levies will either be a permanent feature of trade going forward, tipping the scales to favor US domestic industries, or a bargaining chip that quickly forces nations at the receiving end to lower barriers to American goods and services exports.
The Star
2 days ago
- Business
- The Star
China expands zero-tariff policy for least developed countries
GENEVA, June 18 (Xinhua) -- China has notified the World Trade Organization (WTO) of its expanded zero-tariff policy for least developed countries (LDCs) that maintain diplomatic relations with Beijing, raising product coverage from 98 percent to 100 percent. The new policy, which took effect on Dec. 1, 2024, is part of China's broader efforts to further open up to LDCs and African nations, the Chinese delegation said at a WTO meeting in Geneva on Wednesday. The delegation also briefed WTO members on a recent China-Africa declaration, in which China expressed readiness to extend the zero-tariff treatment to cover 100 percent of tariff lines for all 53 African countries that have diplomatic ties with China. In addition to the zero-tariff initiative, China pledged further steps to promote trade in goods, and to strengthen skills and technical training programs for African LDCs. According to the delegation, these measures aim to create new development opportunities and growth momentum for African countries and LDCs, while also contributing to the stability and positive momentum of global trade. Amid ongoing turbulence in international trade, China called on all WTO members to jointly uphold a free and open international economic and trade order, and to promote inclusive and universally beneficial globalization. China's measures were broadly welcomed by WTO members. Representatives from LDCs, African countries and other economies expressed appreciation, highlighting the unprecedented challenges and uncertainties faced by developing nations. They urged more members to follow China's example by offering targeted preferential policies, capacity-building assistance, and other support to LDCs to advance inclusive and sustainable global trade development.
Indian Express
3 days ago
- Business
- Indian Express
‘It's time for a full tariff overhaul and aligning them with broader economic goals': Ajay Srivastava at explained.Live
Tariffs are essentially taxes that countries impose on imports to protect their domestic industries. When a country wants to shield local producers from foreign competition, it puts a tax on imported goods. Under the World Trade Organization (WTO), every member country submits a tariff schedule. This schedule outlines the maximum tariff a country can impose on each product. These are called 'bound tariffs.' Once negotiated and finalised, countries agree not to exceed these limits. For example, if India commits in its WTO schedule that the tariff on glass is 40 per cent, that becomes the bound tariff. India can lower it in the future but it cannot raise it above 40 per cent. Until recently, most countries abided by their WTO commitments and operated within those agreed limits. The problem started when US President Donald Trump began openly violating these rules. The tariffs he imposed broke at least two major WTO principles, first by exceeding the bound tariffs on a wide range of goods and second, by imposing country-specific tariffs, applying different rates on different sources. The WTO requires countries to treat imports from all member nations equally, so this step is a clear violation undermining the very foundation of the WTO system. Today, every country talks about free trade agreements (FTAs) as if they are the driving force behind global trade. In reality, less than 20 per cent of global trade happens through the preferential route, through Free Trade Agreements or FTAs. The remaining 80 per cent happens under the WTO's Most-Favoured Nation (MFN) tariffs. For countries like India, we need to focus on the 80 per cent trade that doesn't depend on FTAs to grow our exports meaningfully. India has increasingly positioned FTAs as a key tool to boost exports. Initially, our strategy was 'Look East.' We began signing FTAs with our neighbouring countries under SAFTA (South Asian Free Trade Area), then moved on to ASEAN, Japan, South Korea and later Australia. At one point, we were close to signing a deal with China through the Regional Comprehensive Economic Partnership (RCEP) but we withdrew at the last minute. After covering most of the East, we shifted our focus westward. We signed FTAs with Mauritius, the UAE, Switzerland and Norway. We've now announced the completion of negotiations with the UK and it's expected that we'll sign agreements with the US and the EU in the near future. Once these are finalised, India will have FTAs with more than 75 countries, covering roughly 75 per cent of global trade. So while we started late, compared to Europe or the UK, we're catching up fast. On the surface, countries like the US have average tariffs of around four per cent while India's average is closer to 17 per cent. However, this is the result of a larger, negotiated settlement under the General Agreement on Tariffs and Trade and the WTO, which the US helped broker and now conveniently ignores. During these negotiations, developed countries like the US, EU and Japan, then global leaders in global production of industrial and high-tech goods, wanted two things: One, to lower global tariffs to make it easier to sell their high-end goods. Two, to expand the scope of the global trading system beyond just goods to include intellectual property rights and services, such as finance, telecom and IT and agricultural subsidies. Developing nations, like India and China, were seen as producing low-end goods and having weaker intellectual property frameworks. Thus, the developed nations drafted the Trade-Related Intellectual Property Rights, or TRIPS, to bring Intellectual Property (IP) enforcement under the WTO, given its strong dispute settlement mechanism. The result was a trade-off: Developing countries accepted stricter rules on IP and services. In exchange, they were allowed to maintain somewhat higher tariff levels for a longer period. As part of this agreement, every country submitted a 'schedule of commitments' to the WTO for each product. For example, for glass, India might have said its maximum tariff, or 'bound tariff,' would be 40 per cent. These schedules were negotiated and accepted by all WTO members. Once the scope is set, the actual negotiations begin. Each country studies its domestic industries and identifies products and industries it would like to protect, which it considers sensitive sectors. For India, these include certain agricultural products to protect farmers and some industrial items. After industry-wide consultation, the country prepares an 'offer list', based on which tariff lines are listed in an Excel sheet. (India has around 12,800 of them.) In that list, it indicates which tariffs we'll reduce and the timing and extent of these reductions. Items to be excluded completely will be recorded in the negative or exclusion list. After both countries exchange their offer lists, they may choose to send each other request lists, asking the other to reconsider. The process continues over multiple rounds, often taking months or even years. Only after these are resolved do they announce the completion of negotiations, after which the legal teams finalise the text and the leaders of the countries sign the agreement. The agreement itself, typically, becomes effective two to three months after the signing. That's when the actual trade benefits — like lower tariffs and improved market access — start kicking in. We need to take a comprehensive look at our entire tariff structure. Right now, in every Union Budget, we make incremental changes — raise tariffs here, reduce them there — but what we haven't done is a full review of all 12,800 tariff lines. When I did a simple analysis, I found that over 90 per cent of our total Customs revenue comes from less than five per cent of our tariff lines. Meanwhile, the bottom 60 per cent of tariff lines contribute less than three per cent of revenue. So we have to ask why we are maintaining tariffs on those lines at all. A thorough review could also help us fix other long-standing issues, like inverted duty structures, where the import duty on raw materials is higher than on finished goods. That discourages domestic manufacturing because it makes local production less competitive. It has been over 25 years since we last did a full tariff overhaul. Now is the time to revisit the structure holistically. Given the number of FTAs we've signed and the structural issues in our system, it's time to conduct a proper, data-driven review. It's not just about revenue, it's about making tariffs more logical, targeted and aligned with our broader economic goals. In the late 1980s, India was ahead of China in several areas. We were exporting more computer hardware. Our pharmaceutical exports, APIs and formulations, were stronger than China's. In textiles and garments, we were neck and neck. When liberalisation came, we focussed more on deregulation without simultaneously building real manufacturing capacity. China, on the other hand, used that same period to build, sector by sector, with vision and intent. They began with textiles and garments, moved into machinery and then into electronics. They scaled up across industries methodically. Importantly, they had strong backing from American companies. What did China do differently? They applied highly strategic, foresighted policies and executed them well. In contrast, we continue to talk about increasing the share of manufacturing in our GDP, while importing the most basic items — knives, nail cutters, nuts, bolts. It's not for a lack of advanced technology, we've just never drilled down deep into the product level to build competitiveness. We need long-term commitment. We need to stop putting bureaucrats in charge of this transformation and instead identify people who have hands-on experience and empower them, set clear goals and get moving. That's how we change the trade equation, by building from the ground up.
Fibre2Fashion
3 days ago
- Business
- Fibre2Fashion
G7 leaders meet in Canada to discuss global trade issues
Leaders of the Group of Seven (G7) recently began talks in the Canadian mountain resort of Kananaskis, discussing global trade and attempting to iron out opinion differences on President Donald Trump's tariff war on the first day. The G7 comprises the United States, Canada, France, Germany, Italy, Japan and the United Kingdom. G7 leaders recently began talks in Canada, discussing trade and attempting to iron out opinion differences on President Donald Trump's tariff war. Canadian PM Mark Carney cautioned that the world is "more divided and dangerousâ€. “There will be no solution [to the US trade threat] at this summit, but we may be able to get closer to a solution in small steps,†German Chancellor Friedrich Merz said. Summit chair Canadian Prime Minister Mark Carney cautioned that the world is "more divided and dangerous," highlighting the importance of cooperation and economic prosperity for it to shape a better future. "We might not agree on absolutely every issue, but where we will cooperate, we will make an enormous difference for our citizens and for the world, and bring the next era of prosperity," he was quoted as saying by global newswires. On the first day of their discussions, Japanese Prime Minister Shigeru Ishiba and the other leaders focused on the world economy and economic security, including strengthening supply chains for critical minerals, as well as regional affairs. Ishiba stressed the need for the G7 to unite and lead the international community in building a "free, fair and rules-based economic order," according to the Japanese government. He also said it is essential to maintain and reinforce the multilateral free trade regime with the World Trade Organization at its core. Trump, who repeated his complaint about the expulsion of Russia from the group in 2014 after Moscow occupied and annexed the autonomous Ukrainian region of Crimea, said the hypothetical proposal to include China in the grouping is 'not a bad idea". As a consensus on major global issues seems difficult with Trump's 'America First' agenda, the G7 leaders plan to release brief 'action-oriented' statements instead of a joint statement. Carney has invited some leaders from outside the group, including from Australia, India, Mexico, South Korea and Ukraine, who will join their G7 counterparts on the second day of discussions. 'There will be no solution [to the US trade threat] at this summit, but we may be able to get closer to a solution in small steps,' German Chancellor Friedrich Merz told reporters. Shortly after arriving at the summit, European Commission President Ursula von der Leyen made an appeal to 'keep trade between us fair, predictable and open.' Fibre2Fashion News Desk (DS)
Mint
5 days ago
- Business
- Mint
India should hold its ground in trade negotiations with the EU
Next Story R.V. Anuradha , Prachi Priya Talks on a free trade agreement (FTA) with the EU are underway and Indian industry has much at stake. To make export headway, India Inc needs a wide range of European barriers lowered. The EU's CBAM is just one of them. Key concerns must be addressed before finalizing the India-EU FTA. Gift this article The World Trade Organization (WTO) has been of scant effectiveness against US President Donald Trump's sweeping unilateral tariffs. Wielding the shield of 'national security,' the first Trump presidency levied 25% tariffs on imports of steel and 10% on aluminium. The World Trade Organization (WTO) has been of scant effectiveness against US President Donald Trump's sweeping unilateral tariffs. Wielding the shield of 'national security,' the first Trump presidency levied 25% tariffs on imports of steel and 10% on aluminium. India challenged these and later withdrew its case at the WTO on account of a 'mutual settlement,' though the US never withdrew those additional tariffs. WTO panels initiated by other members, including Norway, Switzerland and China, ruled in 2023 that the tariffs did not pass the 'national security' test. Also Read: The EU's CBAM has lent urgency to fair carbon prices The US, however, ignored these rulings. Trump's second presidency has seen the national security shield cast wider, first for sweeping Liberation Day tariffs against over 90 countries, and more recently, for a 50% tariff against steel and aluminium imports. A group of businesses in the US successfully challenged the Liberation Day tariffs, but the administration has appealed the decision. India has so far not retaliated. The UK may reportedly get a conditional exemption from the 50% tariff on steel under a US-UK free trade agreement (FTA), although Tata Steel as a big UK steelmaker may not get that benefit as US import rules require steel to be 'melted and poured" in the country of origin, in this case the UK. It is difficult to envisage a more stark repudiation of the rule of law. Amid the disarray, FTAs have become more relevant than ever to India's trade interests. New Delhi is in the thick of negotiations with the US and EU, having recently announced a deal with the UK. The EU, however, is no stranger to unilateral actions. It is, in fact, the chief architect of 'green protectionism'—steps sought to be justified at the altar of climate change. At the heart of both the US and EU measures is the purported belief that these would protect the competitiveness of local industries. While Trump's trade policy antics grab headlines, the EU's measures—ranging from its Carbon Border Adjustment Mechanism (CBAM) and EU Deforestation Regulation (EUDR) to environmental reporting and sustainability due-diligence mandates for corporates—pose significant challenges for Indian industry. India's exports of nearly $100 billion to the EU, comprising mainly fuels, textiles, machinery, chemicals, automobiles, gems, steel and pharma products, account for about 14% of its total merchandise exports. Given this strategic relationship, key concerns must be addressed before finalizing the India-EU FTA. For steel and aluminium, even if the EU's current Most Favoured Nation (MFN) duty rates are reduced to zero in the FTA, the CBAM would negate that benefit. Also, the CBAM's impending expansion to indirect emissions from electricity will make the duty impact much greater, effectively blocking exports to the EU. The EU's proposed de minimis threshold exempting small importers from CBAM obligations offers little relief, particularly for smaller producers which already face numerous non-tariff barriers. In addition, the EU has safeguard measures in place for various categories of steel imports, including tariff rate quotas that may be extended to other metals. The recently announced European Steel and Metals Action Plan will further tighten trade defence measures, presenting further challenges for our exports to the EU. India will need to negotiate each of these aspects carefully under the bilateral FTA to mitigate the impact on Indian industry. The EU proudly claims the EUDR will guarantee that the products EU citizens consume do not contribute to deforestation or forest degradation worldwide. Underneath that claim, however, lies clever legal drafting that will advantage EU's own producers over importers. The EUDR obligates importers to ensure that imports are not from land that has been deforested or subject to forest degradation since 31 December 2020. Degradation is defined as conversion of primary forests or naturally regenerating forests into plantation forests or other wooded land. It is estimated that the EU has only 2-3% primary forest cover, while India has almost 23%, which makes the disproportionate impact evident. Also Read: Why Eurozone expansion should be welcomed around the world The EU's sustainability directives, while aiming to increase business transparency and accountability, will raise India's Inc's cost of doing business in that region. It is no longer sufficient for a company to ensure compliance with labour and environmental laws; it will also have to take responsibility for compliance by each player in its direct and indirect supply chain. The EU is also reportedly seeking a chapter on Energy and Raw Materials in the FTA. We should be wary of obligations curtailing India's policy space for local sourcing or putting in place export restrictions and offering fiscal incentives for its own capacity creation. The EU's emphasis on securing access to raw materials for its own green transition can be in sync with our goals only if there is a level playing field for Indian access to resources and technologies, and India not treated as a mere raw material supplier. Achieving a win-win in EU-India negotiations needs us to take each of these aspects into account. The authors are, respectively, partner, Clarus Law Associates, and a corporate economist based in Mumbai. Topics You May Be Interested In Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
