India-USA : Trade Ties – UPSC GS2

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.

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.

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.

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.