Leather exports hit by US tariffs: Industry tells Parl panel

The Indian leather industry's recent appeal to the Parliamentary Standing Committee on Commerce regarding prohibitive US tariffs sheds light on the complex interplay of global trade, domestic economic policy, and diplomatic relations. This incident is not an isolated event but rather a symptom of broader trends in international trade, particularly the rise of protectionist measures and the challenges developing economies face in maintaining export competitiveness.

**Background Context: India's Leather Sector and Global Trade Dynamics**

India's leather and leather products industry is a significant contributor to the national economy, known for its strong backward and forward linkages. It's an export-oriented sector, employing approximately 4.42 million people, with a substantial share of women and workers from economically weaker sections. Historically, India has been a major player in the global leather market, exporting a wide range of products from raw hides to finished leather goods and footwear. The industry is largely dominated by Micro, Small, and Medium Enterprises (MSMEs), which are particularly vulnerable to external shocks. India's trade relations with the United States, one of its largest trading partners, have seen fluctuations, characterized by periods of cooperation and occasional disputes over market access, tariffs, and intellectual property rights. The 'America First' policy adopted by the previous US administration, and to some extent continued, emphasized bilateral trade deficits and the use of tariffs as a tool to protect domestic industries, leading to a more protectionist global trade environment.

**What Happened: The Industry's Cry for Help**

The core of the issue is the imposition of a 50% tariff by the United States on certain Indian leather products. This high tariff barrier significantly increases the cost of Indian leather goods in the US market, making them uncompetitive compared to products from other countries or domestically produced goods in the US. The Indian leather industry, through its representatives, formally presented its concerns to the Parliamentary Standing Committee on Commerce. This committee, a crucial part of India's legislative oversight, functions to scrutinize government policies, bills, and issues pertaining to its respective ministry. The industry highlighted that these tariffs are not merely an inconvenience but are actively harming their export volumes, eroding profitability, and threatening the livelihoods of millions. They specifically urged the government for proactive bilateral engagements with the US to negotiate a reduction or removal of these tariffs and requested broader policy and diplomatic support to mitigate the severe socio-economic consequences.

**Key Stakeholders Involved**

Multiple actors are involved in this complex scenario. The primary **Indian Leather Industry stakeholders** include manufacturers, exporters, tanneries, and the millions of workers dependent on the sector. Their immediate concern is market access and survival. The **Government of India** is a crucial stakeholder, with the Ministry of Commerce and Industry responsible for trade policy, export promotion, and negotiations, and the Ministry of External Affairs handling diplomatic engagements. The **Parliamentary Standing Committee on Commerce** acts as a forum for the industry to voice concerns and for parliamentary oversight of government actions. On the other States' side, the **United States Government**, particularly the Office of the United States Trade Representative (USTR), is responsible for setting and enforcing trade policies, including tariffs. Ultimately, **consumers** in both countries are indirectly affected by changes in product availability and pricing.

**Why This Matters for India: Economic and Social Significance**

This issue holds immense significance for India. Economically, the leather sector is vital for achieving India's ambitious export targets, including the goal of reaching $1 trillion in merchandise exports by 2030. Any impediment to a key export sector like leather directly impacts overall export growth and foreign exchange earnings. Socially, the industry is a major job creator, particularly for semi-skilled and unskilled labor, and provides significant employment opportunities for women. A downturn due to tariffs could lead to widespread job losses, especially in traditional leather hubs like Tamil Nadu (Vellore, Ambur), Uttar Pradesh (Kanpur), and West Bengal (Kolkata), exacerbating economic distress and potentially leading to social unrest. This situation also tests India's trade diplomacy and its ability to protect its economic interests in a challenging global environment.

**Historical Context and Broader Themes**

Trade disputes between India and the US are not new. For instance, in 2019, the US withdrew India's Generalized System of Preferences (GSP) status, impacting various Indian exports. This current situation with leather tariffs highlights a recurring theme: the vulnerability of export-dependent sectors to unilateral trade actions by major economies. It underscores the need for India to diversify its export markets, strengthen its position in multilateral forums like the World Trade Organization (WTO), and strategically pursue Free Trade Agreements (FTAs) with other countries or blocs. The role of parliamentary committees in providing a platform for industries to raise concerns and hold the executive accountable is a cornerstone of democratic governance, ensuring that economic policies are responsive to ground realities.

**Future Implications and Policy Responses**

Looking ahead, the resolution of this issue will depend heavily on diplomatic dialogue between India and the US. India might explore various avenues, including bilateral negotiations, leveraging existing trade frameworks, or even considering dispute settlement mechanisms under the WTO if applicable and deemed effective. Domestically, the government may need to enhance support for the leather industry through schemes like the Remission of Duties and Taxes on Exported Products (RoDTEP) or other export promotion measures to offset the tariff impact. There's also a strong argument for the industry to innovate, diversify its product range, and explore new markets beyond the US. This incident could push India to accelerate its efforts in finalizing FTAs with other strategic partners to reduce reliance on single markets and build resilience against protectionist measures. The government's response will be crucial in demonstrating its commitment to supporting domestic industries and protecting livelihoods.

**Related Constitutional Articles, Acts, or Policies**

While there isn't a specific constitutional article directly addressing tariffs, the **Seventh Schedule** of the Indian Constitution places 'Foreign Affairs' and 'Duties of customs including export duties' under the **Union List (List I)**, clearly indicating the central government's exclusive authority over international trade and tariff matters. **Article 253** empowers Parliament to make any law for implementing any international treaty, agreement, or convention, which is crucial for trade agreements. The **Foreign Trade (Development and Regulation) Act, 1992**, provides the legal framework for India's foreign trade policy. Various **Export Promotion Councils** (like the Council for Leather Exports - CLE) work under the Ministry of Commerce and Industry to promote exports. The functioning of Parliamentary Committees, while not directly detailed in specific articles, derives its authority from **Articles 105 (Powers, Privileges, etc., of the Houses of Parliament and of the members and committees thereof)** and **118 (Rules of procedure)**, which allow Parliament to make rules for regulating its procedure and the conduct of its business, including the establishment of committees.