By Suraj Nair
The US Anti Dumping tariffs on China and retaliatory measures planned by China may turn out to be a blessing in disguise for India. The protectionist measures are not based on economics but politics. It is an ego clash between the two big economies of United States of America and China. The worldover, the rising middle class is being taxed heavily and they bear a huge burden on their shoulders. Therefore, the political leadership has to appease these classes and hence the raising of import tariffs and barriers against select nations.
I am reminded of the speech made by Jeffrey Immelt, CEO of GE at the New York University’s Stern School of Business that was reported in Forbes May 20, 2016 issue. He said –“Today -big companies are distrusted; governments and global institutions are failing to address the world’s challenges; globalization is being attacked as never before. This is not just true for the U.S, but everywhere.” To counter the rising protectionist political pressures, GE was making a “bold pivot” strategy of localize. Instead of producing from one place, it was having 420 factories across the globe. He said a localization strategy can’t be shut down by protectionist policies.
Like wise India is well positioned to gain from the trade war between China and USA. We have a large population, skilled manpower, large English speaking population, 70% of the population under 35 years of age, a large democracy and more importantly we have launched Digital India, Skill India and Make In India programmes to boost local manufacturing and output. China needs a market to dump their oversupply and US needs a country who will supply to them. In this trade war, both US and China need a third party to resolve their problems and that is India.
China has built huge manufacturing and mining capacity in the past two decades. When lot of chemical industries in China had to be shut down due to environmental problems, the beneficiaries were Indian companies who could seize the opportunity, ramp up production and export to US markets-Graphite electrodes used in steel manufacturing is a case in point.
USA never had a savings culture unlike India and all the luxury goods and products produced in China and elsewhere were consumed in USA. That is why it is said, ‘the world saves for America to spend.” When China’s wealth increased as a result, the money was not entirely pumped to global economy but used to fund terrorism, arm insurgency and disruptive activities in other nations. Hence, that is why the present anti-dumping measures of US should be seen as a political move not an economical one.
The impact of anti-dumping measures will be temporary. The global economy has gone through many challenges in the past and this too will pass. When the major players flex their muscles and try to prove their supremacy it will lead them to the negotiation table.
The effects of anti-dumping measures will be temporary and soon the nations and global economy would adjust to the new tariffs. India is basically an inward looking economy with production mostly consumed in the country and exports constituting a small part of the GDP. The anti-dumping measures have come at a time when the economy is struggling due to large Non-performing assets in the banking system and related issues. Therefore, the stock market has responded with major indices falling, but this is a temporary phenomenon and if India gets its Digital India and Make in India programs effective, we stand to gain from the US-China trade wars.
(The author is Chairman of Moat Financial Services Pvt Ltd, Kochi)