Collapse of US-India trade-subsidy talks provokes anger in New Delhi

When months of Indo-American trade talks collapsed recently in a dispute over subsidized Indian exports for US markets, American officials here braced themselves for a stormy reaction.

"The Indians will play it as more perfidy from the United States," sighed a diplomat.

He did not have long to wait.

Indian Commerce Minister Pranab Kumar Mukherjee promptly dubbed the US failure to reach the trade accord as a "hostile" and "unfriendly" act. Editorials denounced US "blackmail," charged flagrant discrimination against India, and said the collapse revealed America's true colors in suppressing struggling third-world countries trying to gain a toe- hold in an international economic system stacked against them.

Headlines proclaimed a US policy tilt toward Pakistan, a shattering blow to Indo-American trade relations, and a threat to general bilateral relations as well.

A front-page cartoon in the Indian Express depicted the Statue of Liberty with a new version of the famed Emma Lazarus poem: "Give me your scientists, your doctors, your teachers, but keep your other exports to yourselves."

At issue? Manhole covers, nuts and bolts, shoes, textiles and wearing apparel worth $373 million out of India's annual exports of more than $1 billion to the United States.

Some observers note that India's stormy reaction highlights a disturbing trend in Indo-American relations: a tendency to assume and proclaim the worst about American economic and political policies and intentions.

"Just imagine what India would have said if the United States had sent troops to Afghanistan," said a non-American official, pointing to India's muted reaction to the Soviet invasion of a nearby country. India is linked to the Soviet Union in a 1971 peace, friendship, and cooperation treaty, and the Soviet Union is India's major defense supplier.

US Ambassador to India Robert F. Goheen recently commented, in a magazine published by the US government here, that the Indian government "seems to find it easy to explain why Russia did certain things and therefore mute or temper the amount of blame to be attached to those things.

"It doesn't seem to have the same facility to explain why America did certain things or to reduce the level of criticism which is handed out to us at the same time that limited criticism is handed out to the Soviet Union," Ambassador Goheen said.

India's ire was aroused this summer when the US imposed countervailing duties of 2.5 to 15 percent on the above-listed items to counter Indian government export subsidies, which American manufacturers contend give an unfair competitive edge to the Indian goods in US markets.

It reached a crescendo late last month when the US said it could not agree with India on how to apply bilaterally a section of a broad, complex multinational trade agreement reached in the so-called Tokyo round of trade negotiations.

At the heart of the dispute is a code on subsidies and countervailing duties. The code acknowledges that developing countries may need to subsidize exports to promote their economic growth, but adds that they should reduce and eliminate the subsidies when their goods win standing in the international marketplace.

The talks failed when the United states pressed for -- and India declined to give -- a firm commitment to phase out Indian export subsidies. Had India agreed, the United States could no longer impose countervailing duties solely because exports were subsidized. American manufacturers would have had to prove , through a so-called injury test, that the subsidies were actually harming their business.

India feels particularly aggrieved because Pakistan reached bilateral agreement with the US on the subsidy code -- and thereby gained the benefit of the injury test -- without having to make firm promises on phasing out its own export subsidies.

US officials, however, make no bones about trying to impose more stringent requirements on major trading countries such as India. It has won a commitment from Korea, which gives no subsidies, that it will not give any in the future, and a promise from Brazil to eliminate all subsidies on US-destined goods by 1984. Pakistan's exports to the United States amount to only $86 million a year , compared with India's more than $1 billion worth. US exports to india run at about the same $1 billion a year.

Indian irritation also points up the acute sensitivity of developing nations to what they see as protectionist barriers being thrown up against their goods around the world -- just at the time they need all the export earnings they can get to pay their ever-growing bills for oil imports.

But at a time of recession, inflation and high unemployment at home, US officials acknowledge they are under political pressures of their own to protect American industry and labor from a flood of cheap foreign goods -- particularly when exporters' home governments subsidize their attractive prices.