India-USA : Trade Ties – UPSC GS2

Bilateral Trade between India and USA:
  • In 2019-20, the bilateral trade between the USA and India stood at USD 88.75 billion.
  • The USA is one of the few countries with which India has a trade surplus.
  • India’s trade surplus with the USA increased to USD 17.42 billion in 2019-20 from USD 16.86 billion in 2018-19.
  • For the USA, India was the sixth largest supplier of services imports.
  • India’s large market, economic growth, and progress towards development make it an essential market for USA exporters.
Issues in the Trade Relationship:
  • Tariffs: Both the countries cite market barriers including both tariff and non-tariff barriers, as well as multiple practices and regulations that disadvantage foreign companies.
  • Generalised System of Preferences (GSP) Programme: Effective from June 2019, the USA decided to withdraw duty-free benefits to Indian exporters under the GSP programme.
  • Services: A key issue for India is the USA’s temporary visa policies, which affect Indian nationals working in the United States.
  • India also continues to seek a “totalization agreement” to coordinate social security protection for workers who split their careers between the two countries.
  • Agriculture: Sanitary and phytosanitary (SPS) barriers in India limit USA agricultural exports.
  • Each side also sees the other’s agricultural support programs as market-distorting.
  • Intellectual Property (IP): The two sides differ on how to balance IP protection to incentivize innovation and support other policy goals, such as access to medicines.
  • India remains on the “Special 301” Priority Watch List for 2020, based on concerns owing to its treatment of patents, infringement rates, and protection of trade secrets.
  • “Forced” Localization: The United States continues to press India on its “forced” localization practices.
  • Initiatives to grow India’s manufacturing base and support jobs include requirements for in-country data storage, domestic content (such as laws protecting India’s solar sector), and domestic testing in some sectors.
  • India’s new data localization requirements for electronic payment service suppliers such as MasterCard, Visa, etc.
  • Investment: US concerns about investment barriers remain nevertheless, heightened by new Indian restrictions on how e-commerce platforms such as Amazon and Walmart owned Flipkart conduct business.
  • Defense Trade: The United States urges more reforms in India’s defense offsets policy and higher Foreign Direct Investment (FDI) caps in its defense sector.
Generalized System of Preferences
  • The Generalized System of Preferences (GSP) is a USA trade program designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories.
  • GSP was instituted on 1st January, 1976, by the Trade Act of 1974.
Way Forward
  • There is a huge potential to boost bilateral trade between the countries especially on account of increasing anti-China sentiment in both the nations.
  • Thus, the negotiation should focus on the resolution of various non-tariff barriers and other market access improvements as early as possible.

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