Did Walmart's lobbying against new e-commerce policy lead to India-US trade face-off?

In an attempt to stall India's implementation of new e-commerce rules from February 1, e-retail giant Walmart had lobbied with the US government saying the new rules were regressive and had the potential to hurt the trade ties between the two countries.

However, the lobbying effort yielded no result at the time as India went ahead and implemented the new rules from February 1. At the same time, the lobbying effort by Walmart, as reported by Reuters, has thrown fresh light into the latest trade friction between India and the US. Both the countries are currently experiencing a trade friction after the US canceled India's preferential trade tag and India retaliated with tariffs on 28 US products.

“It (the new e-commerce policy) came as a total surprise... this is a major change and a regressive policy shift,” Reuters quoted from Walmart’s Senior Director for Global Government Affairs Sarah Thorn's email to the Office of the United States Trade Representative (USTR) dated January 7. From February 1, the Indian government implemented new e-commerce norms that barred online marketplaces like Flipkart from selling products of companies where they hold stakes and banned exclusive marketing arrangements that could influence product price.

Walmart tried to seek a six-month delay in the implementation of the e-commerce rules. While Washington did raise concerns about the policy with New Delhi, India reportedly gave a non-committal response to the US. It went ahead and implemented the new e-commerce rules on February.

Bentonville-based Walmart runs 25 cash-and-carry stores in the wholesale-format in the country. The US retail major, which invested $16 billion in Flipkart, is facing challenges after the government issued new guidelines for e-commerce firms having foreign investment.

Walmart spokesperson issued a statement saying, “Walmart regularly offers input to the US and Indian governments on policy issues related to the retail sector. This is, however, a past issue and Walmart and Flipkart are looking ahead; we continue to be committed to complying with this and all other Indian laws and regulations. Walmart has had good consultations with the Government of India, including recent consultations with the Ministry of Commerce, and we appreciate the efforts they are taking to create a strong business environment and its clear commitment to consult with stakeholders on important policy issues. We look forward to further contributing to a vibrant retail ecosystem that supports India’s inclusive economic growth and is consistent with our long term commitment to India.”

The revelation came a day after Walmart International President and CEO Judith McKenna met India's Commerce and Industry Minister Piyush Goyal during which they discussed local sourcing norms for the domestic market. The meeting comes in the backdrop of the government's budget proposal to relax the norms for foreign direct investment (FDI) in single brand retail trading.

India-US trade face-off

However, it is not an exaggeration to assume that New Delhi's lack of intention to heed to lobbying efforts from Walmart and other companies with business interests in India has snowballed into the current trade face-off between the two nations.

A month after the new e-commerce policy kicked in, the US slapped New Delhi with its intent to terminate India's GSP (Generalised System of Preference) trade programme. It issued a 60-day notice period to New Delhi to assure the US that it would provide "equitable and reasonable access" to India's markets. The notice period ended soon after the Narendra Modi 2.0 government was elected to power. The US went ahead and withdrew the GSP tag in a major jolt to the newly elected Indian government.

READ: India a 'very-high tariff nation', says Trump

Soon enough, India shot back by imposing retaliatory tariffs on 28 US products with effect from June 16.

However, in what was seen as a thaw in the escalating trade face-off, US President Donald Trump and Prime Minister Modi met on the sidelines of G20 summit in Japan and directed their officials to meet to resolve the thorny issue.

One of the first such meetings happened on Thursday during which US Commerce Secretary Wilbur Ross said India's protectionist policies and tariff rules are hurting its companies and are a big impediment to attracting FDI. Referring to India's FDI rules in e-commerce, Ross said the recent decisions that has impacted American companies like Amazon and Walmart have created an atmosphere of unpredictability and has hit the confidence of other companies to invest in India.

Just ahead of the meeting an angry Trump took to the Twitter and noted: "India has long had a field day putting Tariffs on American products. No longer acceptable!"

"The Walmart is going to continue to invest in India. I don't mean to suggest that they're not. That's not what they told me. That caused concern on the part of other companies because of this one thing that they really needs to know if they are going into a country that they will be stability of regulation, that there will be transparency and an opportunity to comment on new pending regulations," Ross said after the meeting. Uncertainties like that make it very difficult for businesses to make their major and long-term capital decisions, the US Commerce Secretary later said.

Ross exuded confidence that the Modi Government will take steps to address these concerns.