Trade: The final frontier in India-US ties
Washington and New Delhi’s relations have moved from a period of estrangement in the post-independence and pre-liberalisation era to one of engagement. Today, the strategic partnership rests on three strong pillars, with convergence on defence and security as demonstrated with the inaugural Quad summit in Washington and a new West Asian Quad that has come to fruition. The second pillar touches on shared democratic values as evinced with the words, “We The People”, enshrined in both constitutions and the catchphrase of the world’s oldest and largest democracy, every time a bilateral takes place between the respective leaders. Last, but not least, the strength and ubiquitousness of the diaspora, with the fait accompli of an Indian origin Spelling Bee champion and presence of Indian diaspora at the highest echelons of Silicon Valley.
The relationship fructified as with the reforms of 1991, India opened up, and with that the relations moved from a country dependent on aid, eschewing PL480 subsidies to one that can hold its own on trade, as it could hold its pride with buying submarines and yet its obdurateness by arguing over soybeans.
And trade is the elephant in the reform, as United States Trade Representative (USTR) Katherine Tai touches down in New Delhi for her maiden visit in this position. The agenda is to “restart the Trade Policy Forum (TPF)”, one that has been dormant for four years since 2017, when then Commerce Minister Suresh Prabhu met former USTR Robert Flightier.
Tai will meet Minister of Commerce and Industry, Piyush Goyal as they hold discussions for two days and deliberate on mutual cooperation on enhancing trade and economic ties.
Earlier this month, both Tai and Goyal met virtually as they agreed to take a comprehensive look at ways to expand the bilateral trade relationship and ensure the future success of the US-India Trade Policy Forum, which was started back in 2010 with a view to achieve increased opportunities for SMEs in both countries, enhance participation in global supply chains, and increase bilateral trade.
As Mukesh Aghi, USISPF President and CEO said: “We hope for fruitful discussions that could potentially bring about an early harvest deal. A vibrant Indian economy provides tremendous opportunities for US corporate investment, benefitting both economies. Enhanced trade would greatly strengthen the strategic partnership between New Delhi and Washington, taking this already robust partnership to new heights.”
Former President Donald Trump subsequently discontinued it as he sought a comprehensive trade deal with India. President Trump in the past has called India “tariff king” for what he described as “tremendously high” tariffs on American products, namely Harley Davidson motorcycles.
While there is a sense of cautious optimism in both New Delhi and Washington as Tai and Goyal try to draw up a long-term map for the trade relationship and get a temperature check on where the other side is presently at. However, suffice to say, no one is punting on any major announcement coming from this visit as the administration remains preoccupied with other priorities.
For Washington, the clarion call has been towards demanding greater market access for American goods and services. The priority is towards agricultural produce, dairy products, medical devices such as stents and knee implants and high-end electronics.
For New Delhi, the goal is towards negotiating a smaller trade deal or early harvest deal, similar to an agreement it signed with Canberra, a fellow Quad member. The inaugural Quad summit has shown that there is an appetite for stronger bilateral ties through a larger multilateral framework and that is the hope with Washington.
New Delhi is also keen on the resumption of export benefits under the Generalised System of Preferences (GSP) programme, which was revoked in March 2019 by the US. This withdrawal of GSP benefits removed special duty treatment for $5.6 billion of Indian exports coming into American shores. This has affected India’s pharmaceuticals, (especially in the pandemic era), textiles, agricultural products, and engineering and automobile parts.
However, the GSP program officially expired on 31 December 2020 and needs congressional legislation to be reauthorised.
India is also pressing for exemption from the high duty imposed by the US back in 2018 on steel and aluminium products.
As Akhil Bery, Director of South Asia initiatives at Asia Society Policy Institute (ASPI) wrote in this newspaper, “Instead of focusing efforts on regaining GSP benefits, India should use the TPF to begin negotiations with the US on how to remove the Section 232 steel and aluminium tariffs that the US placed on India– coming to an agreement here could be the US-India mini-trade deal that has thus far eluded both sides. “
There is a push towards progress as Tai has been urged by a bipartisan group of 75 US lawmakers to work towards a deal that will quickly reinstate India’s benefits under an American preferential trade programme that allows tariff-free entry for imports from selective countries, but only if, “progress is made at Trade Policy Forum (TPF)”.
What that progress looks like remains to be seen, as Tai and Goyal seek to iron out the finer wrinkles and also touch base on the upcoming WTO ministerial conference taking place on November 30.
At USISPF’s Annual General Meet, earlier this year, Goyal stated he is targeting an ambitious goal of $1 trillion bilateral trade over the next 10 years between Washington and New Delhi. Currently, that amount is hovering around $150 billion. Goyal loves his cricket, so he knows the “asking rate” is high and to play “on the front foot”, they would need a good start. This TPF could be that start that’s needed if both sides are to get close to that figure.
Akshobh Giridharadas is a former journalist based in Washington D.C. He is currently associated with the US-India Strategic Partnership Forum (USISPF) and a Visiting Fellow with the Observer Research Foundation (ORF).
The views expressed are personal