What to Read in Indian Express Editorial( Topic and Syllabus wise)

Editorial 1: Countering the US tariffs

Context:

With US imposing the secondary tariffs of 25% in addition to the already announced reciprocal tariffs of 25% on Indian products, and WTO dispute resolution mechanisms now defunct, India needs to focus on diversifying its export markets and its exports basket.

Background:

• Following Bilateral meet on February 13, both countries announced an ambitious plan to elevate bilateral trade goods to $500 billion by 2030.To achieve this target, negotiations for two-tranche bilateral trade agreements were to commence immediately.
• India immediately reduced its tariff on bourbon, high-end motorcycles and electrical vehicles. It has also reduced equalization levy for offshore entities. In short, it has offered almost zero duty tariffs on a wide range of products.
• However, certain concerns remained such as limited access to genetically modified crops (GMO), soya, maize and other cereals and dairy products. This is due to serious concerns of vast numbers of small and marginal farmers, dairy farmers. Their livelihood and food security.
• This bilateral trade target has now gone on the back burner, with US now focusing on Russian oil purchases. Though, it has not imposed tariffs on EU and China, the two largest buyers of energy from Russia.
• Even if India stops buying Russian oil, US may change its focus to purchase of Russian Defense equipment, walking out of BRICS, and not trading in the currencies other than US Dollar.
• India has already offered to increase its oil purchase from US to reduce bilateral trade deficit.
• Other potential Free Trade Agreement partners such as EU might have sought similar concessions. So, India has to factor in medium-to-long term consequences.

Effect of Tariffs:

• About 55% of $85 billion goods exports to US will be hit by the tariffs.
• Major Indian export items to US include pharmaceuticals, mobile phones, electronic items, gems and jewellery and textiles and clothing. Except pharmaceuticals and mobile phones, all other exports will be hit badly. Labor intensive sectors such as textile lead to job losses, rural distress.
• Since other competitors of low-to-medium valued products from South Asia and South East Asia face relatively low tariffs. These export orders are likely to be diverted to them.
• Major imports from US include mineral fuel, uncut and unpolished diamonds, capital goods d machinery, organic chemicals and plastics, edible oil and nuts. Most of these products are used as raw materials or intermediate products for the finished goods. India must not impose retaliatory tariffs on US imports.
• Since majority of countries have succumbed to US’s pressure of tariffs, India may not get immediate reprieve.

Limited remedies for India:

• India might have some sigh of relief as US administration may face heat of inflationary pressures, job losses in mid-term elections scheduled in November 2026.
• The dispute resolution mechanisms of WTO are non-functional as US has blocked the nomination of members to seven bodied apex dispute readdressal body called Appellate Bodyof the WTO.  This reduces any complaint against these US tariffs as a mere symbolic gesture.
• These tariffs violate most favored Nation Principle by the US. This principle highlights that there must be non discrimination among countries, except under FTA, in terms of tariff.
• These US actions and its silent accepting by the developed countries show that consensus which underlines the setting up of WTO lies in shambles.

​​​​​​​Way Forward:

• With WTO non-functional, India needs to diversify its export basket and also diversify its export destinations instead of relying heavily on US and EU for its exports.
• India needs to negotiate new FTAs and also strengthen its already signed free trade agreements with Japan, South Korea and Australia. IT should also expand its trade with BRICS.
• India needs multi-sectoral reforms involving both Central and state governments to increase economic growth. These tariffs must be viewed as an opportunity to transform and grow, as we did in 1991 by LPG reforms.

 

Editorial 2: H1B visa debate in US

Context:

Recently, US Commerce Secretary called H1B Visa program a scam, and claimed that the American businesses need to hire more Americans as compared to non-US workers through this scheme. India, which accounts for 70% of these visas, is likely to suffer.

H1B Visa Scheme:

• It allows American employers to hire immigrant workers in occupations that require “a high level of skill” and “at least a bachelor degree”.
• This visa category was created by the Immigration Act, 1990which allowed the employers who cannot otherwise obtain needed business skills and abilities from the US workforce to employ qualified individuals who are otherwise not authorized to work in the US.
• This program was enacted as a long tussle between industry groups and workers union in the US.
• They are issued for a maximum six years at a stretch, after which the visa holder has to either leave for the US for atleast 12 months, or apply for and receive permanent residence (green card).
• New visas are capped at 65,000 each fiscal year, with an extra 20,000 visas available to those with a Master’s degree or higher from a US university. This annual cap does not include those applications for “continuing employment” or those seeking employment at higher education institutions or nonprofit entities affiliated to such entities.

Benefits of the scheme to the US companies:

• With technological boom in 1990s, companies such as Google, and Amazon were the biggest beneficiary of this scheme. They needed specialized talent to boost their growth, but the domestic supply was not sufficient to meet the demand.
• This scheme allowed these companies to hire lakhs of highly skilled workers from countries such as China, India to meet this shortfall.
• These companies gained and maintained the competitive edge in cutting edge technology research and development. This also have positive effect on both the productivity and innovation, benefitting large number of start-ups.

​​​​​​​Criticism of H1B visa scheme:

• Many Congressmen have criticized this scheme as it replaces good-paying Americanswith low-wage skilled workers from abroad. This leads to capital concentration in the hands of powerful business companies.
• This scheme is claimed to have led the problems such as high unemployment, low wages, inflation, a housing crisis, and other economic problems.

India and the H1B Visa:

• Indians have been the largest beneficiaries of this scheme, accounting for more than 70% of successful H1B petitions. China, which accounts for 12-13%, are distinct second.
• India has benefitted from this program. It has increased the remittances to India, many Indian companies such as Infosys have benefitted from this scheme.
• Many educational institutions increased their research capabilities by sending their students abroad for job placements and internships.
• An average Indian worker going to US re earning less than $100,000 per annum as compared to average US IT professional earning $105,990 per year.

​​​​​​​Way Forward:

India is already facing a 50% tariff imposition by the US. Any unfavorable change in H1B visa scheme will negatively affect India. It will lead to job losses, low remittances, and low FDI inflow. India must negotiate a favorable trade deal covering a provision for a fixed amount of H1B visa to Indian skilled workforce. At the same time, it must increase its domestic manufacturing capacity, it’s spending on R&D, and the laws favoring ease of doing business in India.