GLOBAL hegemony appears to be shifting its narrative. Instead of the neoliberal claim that unfettered trade benefits all trading partners, a new discourse is emerging – one marked by protectionism and even echoes of colonial domination as the defining rhetoric of imperial capital. The US imposes reciprocal tariffs on all countries with which it has a trade deficit. The political messaging seems more theatrical than rooted in real economics. America, as if it was generous earlier and as if all other countries gained by it, now says that it is time for it to think of its own industries and workers!

Capital has different colours. The advent of neoliberalism was marked by imposing liberalisation policies on the world and IMF and World Bank had been instrumental in the process. Global capital took advantage of investing across the world using the global reserve army of cheap labour and natural resources. Countries after countries lost their autonomy and surrendered their arsenals of demand management in the name of global competition. Import intensity across the world increased leading to a hollowing out of domestic industries. The glaring exception was China who didn’t join the band wagon and strategically built their capabilities to increase global competitiveness.

Global commentators are acknowledging the rise of China as a global economic power, but they hardly recognise the fact that it has been possible because China didn’t conform to neoliberal policies. BRICS has emerged to be a combination of countries that currently record higher GDP than the G7 countries. The decline of the US as a global power is evident from its desperation to denounce the reality of economic interdependence between countries that the process of neoliberalism once initiated. The protagonist of neoliberalism has now emerged to be the biggest advocates of ‘national interest’. Howsoever nationalistic it may sound, imposing tariffs increases cost of production and effectively it is a tax on the consumer. It is still uncertain how global capital would respond to this new regime as countries would be recalibrating their trade relations with the US. Global finance has still to reconcile with the repercussions that would evolve over time. Global production structures and supply chains are likely to be affected by the growing uncertainty in trade relations. But in the context of ongoing trade negotiations between India and the US it is also important to see how it might impact India-US trade in future.

RECIPROCAL TARIFF

Trade between India and the US roughly amounts to 125 billion dollars. Slapping reciprocal tariffs on India means a general increase of 4.9 per cent tariff across the board. Indian exports to the US market attract a weighted average tariff rate of 2.8 per cent while US exports to India have been facing a weighted average tariff rate of 7.7 per cent. Hence if reciprocal tariff is imposed the additional tariff that would be attached to Indian goods would be about 4.9 per cent. Impacts upon trade in different sectors would be different. The farm sector would be heavily affected if US imports are allowed to enter Indian markets at a lower tariff. On the other hand, manufacturing sectors such as auto components, meat and processed food, diamond, gold and jewellery, chemicals and pharmaceuticals exports are going to be heavily affected by increase in tariff rates. A recent study suggests that for India in case of processed food the additional tariff could be 32.37 per cent, in auto parts tariff may increase by 23.10 per cent, gems and jewellery by 13.32 per cent and pharmaceuticals and chemicals by 8.63 per cent. Tariffs are going to rise for electrical and electronic goods, leather, paper, glass, plastic articles, textiles and clothing, machinery and computers ores, minerals, petroleum and also production of iron, steel and base metals.

Increase in tariffs increases the price of our exports and since most of these products are price sensitive or elastic, our exports are going to be negatively affected due to rise in prices. On the other hand, US is pressurising India to reduce tariff on US farm products. Currently Indian farm exports to the US attract a tariff rate of 5.3 per cent while US farm products exported to India face tariff rate of 37.7 per cent which means a gap of 32.4 per cent. Now if India agrees to reduce tariff rate on US agricultural products and allow easy entry for imports it is going to be disastrous for the Indian farmers. Most importantly US farm sector is heavily subsidised by the government and the agro-food processing giants would easily be able to invade Indian market causing massive destruction of small and petty producers involved in agriculture and allied activities. India has already witnessed how manufacturing sector has been affected by import liberalisation leading to rising import dependence and premature de-industrialisation.

India’s farm products could remain competitive in the domestic market and the small farmers could at least earn subsistence income because of high tariff on imported agricultural products. If the import tariff is reduced there would be huge bankruptcy in the farm sector. Currently 45 per cent of people in India are employed in agriculture and allied sectors and this vast mass of people would be impoverished if India could not protect its domestic market from global agro business MNCs. Tariffs are decided by countries according to their nature of endowments and also according to their national priorities. Imposing reciprocal tariff is essentially an attempt to deny this basic autonomy of countries to decide what are the areas they need to protect and in what all sectors a particular country would be able to withstand global competition.

CRISIS OF THE US 

Although reciprocal tariffs and deportation of undocumented workers or the colonial ambition of annexing Canada, Greenland, Panama or Gaza and cutting down expenditures on research are the highlights in the media but the crux of the problem is obfuscated behind these short-term changes and rhetoric of national interest. The US economy is in deep crisis, and it is expected to slow down further in the coming two years. It is yet to see how global South would be affected by the opening up of markets to the US companies and at the same time producers of the South being restricted to US market as the negotiations continue. But the stagnation of the US market and the massive decline in the growth of domestic sources of investment in the US economy probably mark the terminal phase of US hegemony.

It is precisely because of the massive collapse of real incomes of the working class and super profits of the corporates that led to the defeat of the Democrats. In fact, the Democrats didn’t pose any radical alternative to the republican right-wing policies rather both these political combinations nurtured a consensus with insignificant differences. Trump’s protectionist stance is an immediate response to this helplessness of American people and their expression of anger against the political establishment. It is nothing but a desperate attempt to convey that he is the saviour who is keen to rejuvenating US industry and protecting US jobs.

All the gains achieved by the US working class during the New Deal have almost been eroded in the past fifty years. The real incomes of workers have fallen while the corporates made huge profits during the past two decades.  In the short run, restriction on imports may generate some growth in the productive sector and also employment at the margin but tariffs are essentially tax on consumption. They may increase the cost of living of the working people. It is the companies who would be making more profits in the end while the working people have to pay more even if they earn incomes through new employment opportunities. Also rising cost of production for the US companies may make them less competitive in the long run and eventually this may result in relocation of industry outside the US. It is really a difficult time when the working people around the world are squeezed by the corporates, ‘national’ or ‘multinational’ but ironically the benefits of the big companies are being politically mystified and made acceptable through the rhetoric of ‘national interests’.