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India to counter US protectionism with e-commerce, data security bills

Trade relations between India and the US deteriorated after Washington on June 5 withdrew benefits for Indian exporters under the Generalised System of Preferences (GSP) programme.

india Updated: Jun 19, 2019 07:57 IST
Rajeev Jayaswal and Rezaul H Laskar
Rajeev Jayaswal and Rezaul H Laskar
New Delhi
After retaliating against the US withdrawal of preferential treatment for its exports, New Delhi plans to counter Washington’s growing protectionism with two pieces of legislation that can have wide-ranging impact on American firms.
After retaliating against the US withdrawal of preferential treatment for its exports, New Delhi plans to counter Washington’s growing protectionism with two pieces of legislation that can have wide-ranging impact on American firms.(Bloomberg Photo)
         

After retaliating against the US withdrawal of preferential treatment for its exports, New Delhi plans to counter Washington’s growing protectionism with two pieces of legislation that can have wide-ranging impact on American firms, according to officials familiar with the matter.

Trade relations between India and the US deteriorated after Washington on June 5 withdrew benefits for Indian exporters under the Generalised System of Preferences (GSP) programme. India imposed retaliatory tariffs on 28 American products from June 16 -- a decision it had put off for almost a year.

While the India-US strategic partnership and cooperation on key issues such as counterterrorism continue to be robust, the Indian side is looking to the visit by secretary of state Mike Pompeo on June 25-26 to clear the air on several trade matters that have become irritants, such as US sanctions on Iranian oil imports, the ending of GSP benefits, and tariffs.

Also Read | Solving the India-US trade dispute must be the top priority

Of the two proposed laws, the e-commerce policy is aimed at streamlining online trade, currently dominated by American companies such as Google, Facebook, Twitter, Amazon and Flipkart.

The proposed Personal Data Protection Bill calls for firms to protect personal data of Indians, such as health and financial data, religious or political affiliation, caste, sexual orientation and biometrics, by storing all data in India, government and industry officials said on condition of anonymity.

Multinational companies (MNCs), particularly American ones, are lobbying for a liberal e-commerce policy with virtual autonomy in possession and use of private data, which the proposed legislation aim to regulate, officials said.

The proposed laws assume significance as the two countries are expected to negotiate crucial trade-related issues when Pompeo holds meetings in New Delhi on June 26.

Besides discussions with his Indian counterpart S Jaishankar, Pompeo will meet Prime Minister Narendra Modi and national security adviser Ajit Doval, people familiar with the developments said. These meetings will also prepare the grounds for Modi’s meeting with US President Donald Trump – his first since his re-election – on the margins of the G20 summit in Osaka, Japan, on June 28-29, the people said.

Also Read | US-India trade tension hangs over Indian capital markets

The people said some work is already being done by the two sides behind the scenes to narrow differences before Pompeo’s arrival. “A lot will depend on how much work is done before the visit,” said an official who declined to be named.

“It’s unlikely that all issues will be thrashed out when the US secretary of state meets the external affairs minister, and we are not focussing only on these issues. It’s also about a balanced set of things, taking a look at where the ties are going and fine-tuning the domains where we are working together,” the official added.

The people cited above noted that the strategic partnership and counterterrorism cooperation have progressed well and there are more and more areas where the two sides are collaborating. Pompeo’s visit will help in sharing of perspectives to create more convergence, they said.

“The overall relationship is forward-looking and there’s no doubt that it is moving in a positive direction, but it’s also important to resolve issues that crop up,” the official cited above said. “Both sides are committed to this relationship and have a similar vision, but the nuts and bolts need to be tightened.”

Against the backdrop of these developments, India will not relent to US pressure as it provides a vast market and cheaper resources to American MNCs, officials said.

“In the digital world, data is wealth. There are, however, two crucial issues – who owns the data and how MNCs share revenues earned by using the data. The revenue generated online often goes directly overseas, which is nothing but flight of wealth from India,” said a second official, who also didn’t want to be named.

While referring to differences caused by Washington’s threats of action under the Countering America’s Adversaries Through Sanctions Act (CAATSA) in response to India’s deal to acquire the S-400 missile defence system from Russia and US efforts to wean India away from Russian military hardware, the people cited above said New Delhi will not scuttle the S-400 deal.

“It appears the US has misread the signals from New Delhi or isn’t getting the right communication from its mission on India’s position on these issues,” a third official said.

The MNCs are hassled by India’s decision of December 26, 2018, that modified foreign direct investment guidelines and barred foreign e-commerce platforms from selling products of firms in which they have equity stakes. It also restricted foreign platforms from forging exclusive deals with online sellers.

The US is the oldest democracy and India the largest, and there is immense potential for cooperation but it is possible only on the equity principle, as both sides have to protect their interests, the officials said.

According to the officials, the draft of the Personal Data Protection Bill is ready after legal vetting, and can be introduced in Parliament at any time, and this legislation will pave the way for the e-commerce policy, the draft of which too is ready, the officials said.

At a meeting chaired by commerce and industry minister Piyush Goyal on Monday, e-commerce industry representatives raised concerns about the draft e-commerce policy, which they felt was not “adequately consultative”, an official statement said.

Goyal held extensive consultations with the tech industry and e-commerce companies to understand their concerns and to include their suggestions for building a robust data protection framework, the officials added.

Agneshwar Sen, associate partner, tax and economic policy group at EY India, said: “By gracefully refusing to request the US for extension of GSP benefits, India has clearly indicated it would prefer to trade on the competitiveness of its products rather than through preferential treatment...This is an assertion of India’s self-confidence, which is manifest in its imposing retaliatory tariffs on 28 US tariff lines. The unilateral action of the US imposing tariffs on Indian steel and aluminium exports needed a response.”

“The e-commerce policy and the [draft] Personal Data Protection Act cover two very important elements of future trade and security regime in any country, particularly of the size, complexity and security concerns as of India.”

Ajay Sahai, director general and CEO of the Federation of Indian Export Organisations (FIEO), said, “Countries like Germany, Russia and China have a data localisation policy covering different aspects of data. Data localisation will help regulatory supervision and check business jurisdiction issues exploited by large multinational entities. However, we should have strong norms covering data-sharing and privacy of data to assure overseas entities working in India.”

First Published: Jun 19, 2019 05:41 IST

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