Déjà vu in Delhi! India knows the sting of tariffs
In the late 1980s, the US was engaged in an intense trade war with Japan, its primary economic rival at the time. Washington developed an arsenal of diplomatic and economic weapons for its war including Super 301, a legal mechanism upgraded in 1988. It authorised the US President to identify countries with 'unfair' trade practices and punish them with retaliatory tariffs.
Once the statute came into force, President George HW Bush did not limit its use to Japan. His administration sought to address America's rising trade deficit by using the threat of Super 301 to strong-arm several countries, including American allies like Europe, South Korea and Taiwan.
Parallels with the current administration are evident. In his first term, Trump used tariffs to battle China; now he uses them on friends and foes alike. Once Washington develops a policy tool to coerce one country, it becomes all too tempting to use that tool indiscriminately and sometimes unthinkingly. It is an important facet of US hegemony, regardless of who occupies the White House.
Many countries tried to avoid Super 301 by hastily cutting deals with Washington to open their markets or voluntarily restricting their exports. In June 1989, the Bush administration declared that it would target three countries — Japan, Brazil and India.
New Delhi was taken by complete surprise. Its relations with Washington had been improving in the previous few years. Its trade surplus with the US was relatively paltry. Washington's two central demands, that India allow American investments and foreign insurance companies, seemed arbitrary.
Unlike Japan and Brazil, India refused to even enter into negotiations with the US. Then Prime Minister Rajiv Gandhi said he wouldn't let the US dictate how to run the country. American heavy-handedness sparked intense outrage in the Parliament, further tying the govt's hands politically.
At the same time, the American threat of tariffs posed serious risks for the Indian economy. US share in India's exports at the time was about one-fifth, the same as it is today. India was much less dependent on foreign trade in 1989 than it is today, but it was also a much smaller and more vulnerable economy.
India failed to enlist world opinion to its side. Western countries, including even Japan, agreed with Washington that India was too restrictive of foreign investments. Today, Indian diplomats looking for international solidarity against US tariff assault may discover a similar situation. Many countries may deplore Trump's ham-fisted tactics, while endorsing his goals of lowering Indian protectionism and weaning it away from Russian oil.
PM VP Singh, elected in December 1989, tried to placate Washington through a tightrope act. While India continued to refuse negotiations on the two demands under Super 301, it offered concessions on other economic fronts. Americans were not satisfied with Indian offerings.
In April 1990, Japan and Brazil were dropped from the Super 301 list, leaving India as the sole target. Washington issued a two-month ultimatum to New Delhi. American 'bullying' was loudly condemned by Indian media and politicians.
In the end, the showdown never arrived. At the expiration of the ultimatum deadline, the Bush administration determined that following through with its threats was not worth it. It declared that while India was an 'unfair trader', it was not in American interest to take retaliatory actions. The Super 301 process against India was discontinued.
The Bush administration backed down without much loss of face because Washington's trade campaign was global and India was only a small piece of it. Same remains true today. Although the tariffs are a major issue for New Delhi, they are just one battle among dozens that Trump is fighting on multiple fronts.
The Indo-US relationship quickly bounced back, buoyed by alignment of certain economic and geopolitical interests. However, the Super 301 episode left a bad taste in the Indian mouth. It was yet another reminder that American power can unexpectedly become capricious and overbearing.
In the last few years, many commentators have expressed befuddlement at why New Delhi resists moving closer to Washington despite its persistent conflict with Beijing. Its reticence partly stems from its fear that greater dependence on the US will leave it more vulnerable to Washington's volatile high-handedness that manifests from time to time. Trump's tariff assault has again affirmed the wisdom behind India's caution.
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Hindustan Times
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Write to Bojan Pancevski at Laurence Norman at and Daniel Michaels at
