The Bush administration has decided against imposing trade sanctions on India for its barriers to foreign investment and insurance sales and instead will try to persuade New Delhi to deal with the issues in global free-trade talks, Indian and administration officials said yesterday.
U.S. Trade Representative Carla Hills informed Indian Ambassador Abid Hussain of her decision yesterday. She said the United States would not impose retaliatory duties on Indian imports at this time, Indian officials said. But she kept open the possibility of retaliation later if the dispute is not settled during the current round of negotiations to strengthen and expand the global trade compact known as the General Agreement on Tariffs and Trade (GATT).
The decision, to be announced today by Hills, effectively ends the possibility of immediate use of the most controversial element of the 1988 trade law, the "Super 301" provision that allows retaliation if other countries are found to trade unfairly, costing American companies jobs and profits.
Other nations have attacked the law as "unilateralism" and said the multilateral GATT talks could collapse if the United States continues taking trade actions on its own. Frans H.J.J. Andriessen, vice president of the 12-nation European Community, said repeal of U.S. unfair trade laws is "an indispensable element" for the successful conclusion of global free-trade talks in December, which President Bush has identified as his most important trade priority.
After citing Japan, Brazil and India under the Super 301 provision last year, the Bush administration has sidestepped use of the law and refrained from ordering retaliation.
"The use of U.S. trade law from now until December is going to be minimal if at all because of the sensitivity of the GATT negotiations. We don't want to give the developing countries or the EC any ammunition," said William T. Archey, international vice president of the U.S. Chamber of Commerce.
Japan, India and Brazil were cited as unfair traders under Super 301 last year. While refusing to negotiate under the threat of retaliation, Japan nonetheless settled the U.S. complaints this spring as did the new government in Brazil by passing a wide range of free-trade laws.
India, however, steadfastly refused to talk to the United States about complaints over its limits on foreign investment and the banning of foreign companies from its insurance market.
Administration sources made it clear that India was singled out last year because of what they saw as its obstructionist attitude in the GATT talks. New Delhi has opposed expanding GATT to cover piracy of patented computer software, books, records and pharmaceutical products. The new U.S. strategy was designed to put pressure on India to be more forthcoming in the GATT talks, known as the Uruguay round of negotiations.
"India is very honestly negotiating in the Uruguay round," said Prem Singh, commercial counselor at the Indian Embassy here.
Without divulging her decision, Hills told reporters yesterday that she had three options in dealing with India: "retaliate forthwith" against policies "I do regard ... as unreasonable;" do nothing; or put this issue into global free-trade talks "in hopes the Indians will be more forthcoming ... and the problem will go away."