India’s Electronics Industry Warns of Rising Competition from Saudi & UAE

India's electronic industry has reacted with alarm at increasing competition from countries like the UAE and Saudi Arabia, asserting that their maturing manufacturing base could be an extremely serious danger to India's exports.

India Cellular and Electronics Association (ICEA), the industry group of big mobile phone manufacturers in India like Apple, Dixon, Motorola, Xiaomi, Lava, Foxconn, and Flex, has asked the government to remain vigilant against such threats. Rather than implementing tit-for-tat tariffs, ICEA has proposed diplomatic negotiations to address the problem.

A number of developing nations have lower tariff rates than India at present, including Brazil, Turkey, Saudi Arabia, and the UAE at 10 percent and the Philippines at 17 percent. ICEA has found Saudi Arabia and the UAE to be immediate threats to Indian electronics exports because of their Special Economic Zones (SEZs), competitive manufacturing facilities, and possible labor-cost advantages.

In spite of historical trade restrictions, the benign tariff treatment of Brazil introduces an aspect of strategic uncertainty and requires India to watch the situation closely.

ICEA has emphasized the importance of ongoing negotiations, aligning industry and government interests to leverage provisions within the U.S. Executive Order. “ICEA strongly recommends continued intensive negotiations, closely aligning industry and government interests to proactively utilize provisions within the U.S. Executive Order (particularly Section 4(c))," the association said in a statement.

The ICEA also recommended avoiding retaliatory tariffs, cautioning that the provisions of Section 4(b) of the order enable the U.S. to retaliate in terms of increasing tariffs. Instead, it suggested diplomacy and negotiation to obtain better results.

The American administration recently announced a 27 percent retaliatory tariff, after serious progress was made in the bilateral trade negotiations with India. Though this tariff indicates India's successful diplomatic initiative, ICEA is of the opinion that there remains scope for additional reductions through continued strategic interactions.