Protectionism in U.S., Europe may hit engineering exports

Shipments for FY19 likely to fall $5 billion short of the $90-billion target

Battling barriers: U.S.-China trade war and a likely phasing out of promotion schemes could hit shipments.

Engineering exports may slip by about $5 billion from the $90 billion target set for this fiscal due to increased protectionism in the U.S. and Europe, officials at the erstwhile Engineering Export Promotion Council (now EEPC India), the apex body of engineering exporters, said.

“Exports touched an all time high of $76.2 billion in 2017-18 and in the first seven months, it rose by 11.3 % over a year ago,” Ravi Sehgal, chairman, EEPC India, said.

U.S. GSP

“Yes, there are issues and ambiguity on the continuation of U.S. GSP (generalised system of preferences) benefit scheme for India and rise of protectionism in the developed countries .. which are likely to impact overseas shipment from India adversely going forward,” he told The Hindu. Tariff war between the U.S. and China and possible phasing out of India’s export promotion schemes were also notable challenges.

Enquiries revealed that with the imposition of additional dumping duty by the U.S. on India, certain categories of engineering goods would face an import tariff of about 30% against an average of 6% earlier. Steel exports, accounting for about 15% of India’s engineering exports, may be affected it was learnt.

The GSP issue helpsfoundry industries in Mexico, Canada, Vietnam and Cambodia but they lack the capability to match India’s capacity, exporters said.

An EEPC official explained that although India argued its case well in Europe and faced lower ADD (anti-dumping duty) than China, there were efforts to protect domestic industry among European countries too.

Engineering exports account for about 25% of India’s total merchandise exports with the SME sector contributing about 35% of the shipments. The U.S. remained the top destination followed by UAE and the U.K. Capital goods, consumer durables, non-ferrous metals and its products and primary iron and steel, including ferro alloys, comprised the Indian export basket.

However, India’s growing economy and stable government were attracting overseas investments in the engineering sector from countries like Korea and Germany, Mr. Sehgal said.