India–US Trade Relations
India – US economic relations
- Bilateral trade in goods and services—estimated at just $16 billion in 1999 and $59.5 billion in 2009—topped $146 billion in 2019.
- The U.S. is India’s largest trading partner, goods and services combined. Bilateral trade in goods and services grew by more than 10% per annum over the past two years to reach US$ 142 billion in 2018.
- In 2019, India was the ninth-largest trading partner of the United States, while the United States was India’s largest trading partner—surpassing China’s rank for the second consecutive year.
- The level of goods traded between the United States and Korea is nearly 1.5 times larger than between the United States and India— even though Korea’s GDP is roughly 40% smaller than India’s.
- Vietnam’s trade with the United States is 84% that of India’s, even though India’s GDP is ten times larger than that of Vietnam
- China’s trade with United States is 6 times larger than.
- This highlights the potential of trade between India and the USA. Also, as USA tries to diversify its dependence on China and with increasing labour costs in China, the potential for US and India trade is immense. Both India and the USA are democracy and have deeper convergence of several issues apart from increasing security cooperation.
Trade related Issues between India and US
Despite immense potential of bilateral trade between India and USA, certain issues have limited realisation of trade potential between them.
- US imposed tariffs on steel and aluminium imports from India. US has also called out high tariffs in India on certain categories such as automobiles.
- India drew up a list of retaliatory tariffs and filed it with the World Trade Organization (WTO) but held off on applying them.
Generalized System of Preferences (GSP)
- US removed India from the GSP program.
- India imposed retaliatory tariffs, after which the United States filed a dispute at the WTO. These retaliatory tariffs remain in place.
- In 2018, India was the largest beneficiary of GSP; over one-tenth ($6.3 billion) of U.S. goods imports from India entered duty-free under the program (e.g., chemicals, auto parts, and tableware).
- India has been demanding enhanced market access for its agricultural produce in the US market. India has opposed enhanced phyto-sanitary standards being imposed by USA to curb imports from India.
- Particularly India wants restoration of market access for wild caught shrimp and water buffalo meat.
- US wants to export excess ethanol for India’s ethanol blending with petrol.
Intellectual property rights
- US concerns include piracy of software, film, and music and weak patent protections.
- India amended the Patents Act to recognize product rather than process patents.
- Despite the changes in the Patent act, US has raised concerns about insufficient patent protections, restrictive standards for patents, and threats of compulsory licensing.
- India restricts FDI in certain sectors. Under, India’s FDI regime above a certain cap FDI investors have to take permission for investing in India. US considers this as a restrictive.
Pharmaceutical and Medical Devices
- U.S. Trade Representative (USTR) expressed concern for years about customs duties on medical equipment and devices.
- Issues increased when Indian government applied new price controls on coronary stents and knee implants.
- India wants cooperation from US in developing a secure pharmaceutical manufacturing base for augmenting global supply chains. However, COVID-19 pandemic has stalled inspections of Indian pharmaceutical facilities by US Drug Regulator, Food and Drug Administration (FDA).
- Issues exist regarding data localization, data privacy, and e-commerce.
- E-commerce rules of India and Data Equalisation levy have also been contentious trade issues between the two countries. US feels that these hit global software giants adversely. For ex. Amazon, Apple, Microsoft and Google.
- Data Protection bill has not been passed in India.
- India’s rules for Mandatory Testing and Certification of Telecom Equipment (MTCTE) have also been a concern for US.
Labour movement and visas
- United States, H1B and L1 visas permit highly skilled workers from other countries to be employed.
- The Indian government continues to object to U.S. laws passed in 2010 and 2015 that apply higher fees on companies with more than fifty employees if more than half of those employees are in the United States as non-immigrants.
- In 2016, India filed a trade dispute at the WTO over these visa fees, arguing that the higher fees “raised the overall barriers for service suppliers from India.”
- India has been demanding conclusion of Social Security Totalisation Agreement between India and US, this would allow Indian citizens to repatriate their social security savings once they come back to India.
- Legal, nursing and accountancy services can facilitate growth in trade and investment, both countries promote engagement in these sectors
New emerging trade issues
- US has been pressing for issues such as child labour and forced labour in global supply chains. India does not want to tackle these issues in the framework of trade agreements and trade talks.
- US has been pressing for bringing in environmental issues in the framework of trade talks.
- Standards and conformity assessment procedures are often used for trade restrictive practices.
- Both are emerging as strategic partners and as suchthere is a need for convergence on all issues concerning both the countries. Tradeforms a foundation of such strategic partnership.
- Reinstatement of the GSP – It would benefit the Indian exports to USA. India can act as an alternative for Chinese goods in the US markets.
- Delinking Issues – US reportedly considered capping the issuance of H1B visas to about 15% for any country that “does data localisation.” This goes against the spirit of having an overall improvement in trade between the two.
- Like the 2+2 dialogue, there is a need for institutionalisation of the economic dialogue between USTR and Ministry of Commerce and Industry.
- India needs to boost manufacturing sector and make exports more competitive to become a major trade partner of USA replacing China.
- Both nations must actively work towards de-escalating trade tensions.
- Regular convening of Trade Policy Forum and its working groups to iron out trade issues.
- Collaboration on emerging technologies such as cyberspace, semiconductors, AI, 5G 6G and future generation telecommunications technology.
- Participation and collaboration between private sector in both countries in building critical linkages in critical sectors.
- Regular exchange of information on standards and conformity assessment procedures to ensure that all requirements are no more trade restrictive than necessary. There is a need for transparency in the rulemaking process and focus on enhanced good regulatory practices.