Date: 11/01/2023

Relevance: GS-2: India and its neighborhood- relations; bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Key Phrases: India-US Trade Policy Forum, Generalized System of Preferences (GSP) scheme, Intellectual Property (IP) protection, Indo-US bilateral trade, Issues related to trade barriers,

Context:

• The Union Commerce & Industry Minister of India is on an official visit to New York and Washington DC this week.
• He will participate in the 13th edition of India-US Trade Policy Forum in which the minister and his US counterparts will have one on one meetings and joint sittings on crucial issues.

More on the News

• The joint forum is likely to take up wide ranging issues of India’s interests which includes
  • Renewal of trade benefits under the Generalized System of Preferences (GSP) scheme.
  • Removal of penal tariffs on steel and aluminum.
  • Sorting out regulatory issues on health-related products.
  • Speeding up visa approvals.
• The US agenda is expected to focus on
  • Liberalization of digital trade.
  • Intellectual Property (IP) protection.
  • Lowering of import tariffs.
  • Redressal of market access restrictions for farm products.
  • Prioritization of labour-related issues.
• The India-US talks are also likely to take up current issues such as disruptions in supply chains due to the Ukraine war and the Covid-19 situation in China and the need for diversification.

Leveraging the Indian Diaspora

• About 4.2 million Indian Americans/Indian origin people reside in the US and the Indian Americans constitute the third largest Asian ethnic group in the US.
• Indian Americans are one of the most successful immigrant communities in the US and are excelling in diverse fields, including politics.
  • In 2020-21, the U.S. had 23% share in India’s total remittances and surpassed Saudi Arabia to become India’s top source country for remittances.
• The nearly 200,000 Indian students in the United States contribute $7.7 billion annually to the U.S. economy.
• The Indian diaspora has been a catalyst in cementing closer ties between India and the U.S.
• The Indian Diaspora can help Indian economy through proactive means such as
  • Buying of India-made products, including handlooms and handicrafts for gifting needs and festive occasions.
  • Can present India investment opportunities to investors in the US.
  • Contribute to India’s growth story through philanthropy, knowledge transfers and taking innovation to India.

Issues at hand

• Issue of Generalized System of Preferences (GSP)
  • The GSP scheme for India, that allowed Indian exporters tariff benefits on a number of products, was withdrawn by the Trump administration in 2019 and its restoration is one of India’s many demands.
• Tariffs and duties
  • India also looks to remove penal tariffs on Indian steel and aluminum.
  • Both the countries cite market barriers including both tariff and non-tariff barriers, as well as multiple practices and regulations that disadvantage foreign companies.
• Visa and related issues in services
  • A key issue for India is long delays in appointments for US visas and USA's temporary visa policies, which affect Indian nationals working in the United States.
• Issues related Intellectual Property (IP) rights
  • The two sides differ on how to balance IP protection to incentivize innovation and support other policy goals, such as access to medicines.
  • Based on concerns owing to its treatment of patents, infringement rates, and protection of trade secrets the US had kept India on the “Special 301” Priority Watch List for 2020.

Way forward

• Initiate Tariff related reforms
  • To resolve the issues at hand both countries should cooperate on tariffs because removing the tariffs ultimately will be beneficial for the bilateral trade relationship.
  • India should take the initiative and consider unilaterally removing its retaliatory tariffs; it will represent India as willing to be a constructive player in trade talks.
• Countering China
  • From a strategic point of view, one of the ways that India can counter China is through deepening trade ties with partners who are committed to supporting India’s growth.
  • A deal with the US will be beneficial for India, both strategically and economically.
• Create conducive environment for investments
  • A vibrant trade strategy to attract investors can complement the Production-Linked Incentive (PLI) schemes, and help to boost both manufacturing and exports.
  • India needs to improve the efficiency of ports, shipping, Customs, etc., via automation which would be a big boost for participation by MSMEs.
• Facilitating Digital Growth
  • To promote further growth in the digital sphere, which represents over USD 100 billion of bilateral trade, the two must address several foundational issues; digital service tax, cross-border data flows and common cellular standards.
• Explore scope of free trade agreements
  • Although as of now the two counties do not have any FTA but the new age free trade agreements are based on reciprocal economic benefits and enhanced trade facilitation, India can resort to ways which will facilitate smoother trade
  • The new-age FTAs demand more holistic and diversified trade opportunities with trade in services, e-commerce, labour, climate/environment, digital trade, public procurement, supply chains etc.

Conclusion

• A vibrant partnership and cooperation between the world’s oldest and largest democracies is critical and should continue to be strengthened in response to increasing threats in the Indo-Pacific region.
• Thus, the Forum’s outcome would hold great significance not only for the two countries but for other nations as well and therefore the representatives of both the countries should work to create a conducive environment to facilitate more open, secure and transparent trade, and resilient supply chains.

Source: The Hindu

Mains Question:

Q. Give an account of India- US trade relations. A change of administration in the United States has led to improved India-US relations, specifically trade relations, critically evaluate. (250 words).