Breaking Barriers: US-India Trade Dialogue

The joint statement released by the two governments highlighted the “significance of the TPF in forging robust bilateral trade ties and enhancing the bilateral economic relationship to benefit working people in both countries” [1].

While Piyush Goyal highlighted India's competitive advantage in terms of cost, skilled manpower, and huge domestic market, combined with American innovation and investment, can become a winning partnership between “natural friends”, Tai lamented how the bilateral trade between the two is “not living up to its potential”. “The trade relationship between our two countries is a priority, both for President [Joe] Biden and for me. That’s why it was important for me to come to India and relaunch the Trade Policy Forum on my first trip to Asia,” Tai said at the opening conference.

Scholars and analysts from across the border have welcomed the move to re-start trade talks. Mukesh Aghi, President and CEO of the Washington-based US-India Strategic Partnership Forum (USISPF), said, "A vibrant Indian economy provides tremendous opportunities for US corporate investment, benefitting both economies” [2]. Highlighting the priority issues from the American side, Richard M. Rossow, Wadhwani Chair in US-India Policy Studies at the Washington-based Center for Strategic and International Studies emphasized upon pushing a wider trade agreement with India will take a great deal of senior-level time and energy. Arun Kumar, a former official in the Obama administration believes it is a valuable platform for constructive discussion. "The TPF has a key role to play in deepening understanding of each other's positions in a non-negotiating, non-transaction oriented setting," he said [3]. 

Bolstering Ties

The US-India Trade Policy Forum (TPF) has its origins back to the Manmohan Singh-led government in the 2000s during the time when a civil nuclear agreement was also in the making. The last TPF meeting (11th) was held in October 2017 in Washington D.C where the United States first raised concerns related to the trade deficit with India. Many demands raised then were similar to the ones raised this time, indicating inaction or lack of interest over the course of years.

The TPF is further divided into two Working Groups for functional purposes. One is on Intellectual Property coordinated by the Department of --- and the other on the Trade and Market Access, to be coordinated by the Department of Commerce [4]. The 12th meeting proposed reconvening the TPF Working Groups on agriculture, non-agriculture goods, services and investment by 2022.

The Ministry of Commerce & Industry and the Office of the US Trade Representative are the nodal agencies from the Indian and the U.S side respectively.

One of the things discussed in the 12th TPF was mutual market access. The Forum decided to forge an agreement to facilitate U.S. market access for mangoes, grapes, and pomegranates, pomegranate arils from India, and reciprocate with similar access in the Indian market to cherries, pork/pork products and alfalfa hay for animal feed from the United States, as per the official statement. The other element was negotiating a Social Security Totalization Agreement in the interest of workers from both sides which would allow them to move their retirement savings, the lack of which disproportionately affects Indian IT workers in the U.S. since they lose billions of dollars in U.S. social security contributions which they cannot send back home.

Since climate change remains one of the emerging areas for international cooperation, given how all contemporary FTAs include green exchanges between developing and developed countries. At the TPF as well, the U.S expressed interest in exporting ethanol to India while committing its support to the country’s goal of reaching 20 percent ethanol blending with petrol by 2025.

Key Issues

During her maiden visit to India, U.S Trade Representative Tai flagged India’s ‘unpredictable’ regulatory norms, high tariffs and market access restrictions as key impediments to bilateral trade. [5].

A February 2020 article by Alyssa Ayres of the Council on Foreign Relations enumerated eight such key issues and areas of disagreement between the two sides [6]. In addition to long-standing issues of agriculture, IPR regime, medical devices and investment barriers, Ayers highlighted the key emerging irritants in the bilateral trade partnership including digital economy, trade deficits and service sector visas. India's concerns over data localization, data privacy, and e-commerce rules have created new frictions between the two democracies, while India seeks greater access for "movement of natural persons" through a liberal visa regime of the U.S, allowing more Indian immigrants to work in the States. In the sector of the digital economy, after India’s 2% equalisation levy (EL) on non-resident “e-commerce operators, the USTR proposed retaliatory action and initiated an investigation against the country’s Digital Services Tax (DST), labelling it as “discriminatory”. The concerns over a trade deficit with India was echoed by the Donald Trump administration leading to India's removal from the Generalised System of Preference (GSP) program in 2018, which gives special trade treatment through "equitable access" to certain developing countries. India's objections and retaliatory tariffs made Washington file a dispute at the WTO.

Tai mentioned a collaboration on "worker-centric" policies, an indication to bring labour issues to trade talks. "US trade policy has become disconnected from people [7]. “There's a significant trust gap between workers, citizens. We need to ground our trade policy in the reality of people so that we can build back support to become strong reliable partners for trade," Tai said. Meanwhile, New Delhi has been opposed to the inclusion of non-trade issues at various fora, including the World Trade Organization. Cautioning India, a trade expert mentioned how developing countries' competitive advantage in labour has eroded wherever the US has involved worker issues.

Post Tai’s visit, analysts are optimistic that while formalisation of a trade pact may take some time as it depends upon ironing out the differences on key issues, but hope that India will push the US for negotiating a smaller trade pact or a mini trade deal in the coming months.

References:

[1]https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/november/joint-statement-united-states-india-trade-policy-forum

[2] The Print, “US, India are set for tough talks as US Trade Representative Tai comes calling this month”, URL:https://bit.ly/341iTNF

[3] The Economic Times, “India-US Trade Policy Forum has key role in deepening understanding of each other's positions: Former Obama admin official”, URL:https://bit.ly/3qCpZ2N

[4] https://dpiit.gov.in/sites/default/files/institutional-mechanism-27July2020_0.pdf

[5]https://www.thehindu.com/business/Industry/unpredictable-policies-key-impediments-to-bilateral-trade-us-tells-india/article37632757.ece

[6] https://www.cfr.org/article/field-guide-us-india-trade-tensions

[7] The Economic Times, “USTR Katherine Tai calls for worker-centric policies in trade talks”, URL: https://bit.ly/3mJxQdO

Pic Courtsey-Dominik Luckmann at unsplash.com

(The views expressed are those of the author and do not represent views of CESCUBE.)