The collaboration between the United States and India lie at the heart of our strategic interests in Asia. India has the sixth largest economy in the world in nominal terms and nearly one-fifth of the global population, with a long tradition of entrepreneurialism and democratic governance. India is already an important market for US goods and services and has the potential to become a crucial link in the global manufacturing supply chain.
While the fundamentals of this relationship are strong, below are some priorities to strengthen this partnership further in the coming year.
Through these priorities we see tremendous opportunity to deepen the US-India relationship, to the mutual benefit of both countries.
India represents a commercial and strategic opportunity for the U.S. in the Indo-Pacific region especially as countries look to de-scale their reliance on China.
U.S.-India trade is significant but well below its potential. U.S.-India goods and services trade totaled $146.1 billion in 2019, with U.S. goods exports reaching $34.3 billion and U.S. services exports at $24.3 billion. India was the United States’ 12th largest goods export market in 2019.
While President Trump and Prime Minister Modi signalled an interest in strengthening trade ties, progress has been stymied by their inability to conclude a first-ever trade agreement. The U.S. and India have been unsuccessful in their efforts to reach a modest, but potentially unprecedented, trade deal since April 2018, when the United States launched an eligibility review of India’s compliance with the Generalized System of Preference market access criterion. Meanwhile, the U.S. imposed 232 steel and aluminium tariffs in 2018 and India retaliated in 2019. And in response to the Indian government’s decision to increase and broaden its Equalization Levy in February 2020, the U.S. included India on the list of countries targeted in its June 2020 section 301 investigation of digital services taxes that are viewed as discriminating against U.S. companies.
Even as these trade tensions escalated, the Trump administration showed no interest in reconvening the Trade Policy Forum (TPF), the mechanism for bilateral trade dialogue, absent conclusion of a market-opening agreement. Indeed, the last TPF meeting was held in October 2017, just before the initiation of the GSP review.
In the meantime, India has implemented increasingly protectionist policies, including on digital trade, regulatory barriers, and government procurement that support industrial policies designed to incentivize investment in domestic manufacturing. India has leveraged and is considering significant new barriers that would discriminate against imports in a push to secure more domestic investment, especially in manufacturing. Trade remedy cases, mandatory standards, discriminatory regulatory treatments are all emerging areas that could further destabilize growth in US-India trade.
The following are recommendations that could be deployed in the first year of a Biden Administration to advance shared interests, particularly on COVID-19 recovery efforts, and to address growing anxiety over China’s behavior in the region.
Hold a TPF meeting
A TPF meeting early in the new Administration would underscore the importance of the relationship. Use the meeting to establish a work plan on priority issues, including:
Doing so would signal the priority the Biden Administration puts on building economic U.S.-India relations as part of its efforts to strengthen the overall relationship and demonstrate the two sides’ ability to resolve irritants. It also would pave the way for discussions of further cooperation and possible future agreements, whether on specific issues of common interest or a broader agreement.
Initiate a digital trade dialogue under the TPF and persuade India to delay implementation of regulations related to digital services, including a digital services tax, data localization requirements, limitations on cross-border data flows, and electronic payments standards, until the two sides can further engage on these issues. With many countries contemplating establishing fora to avoid digital fragmentation and ensure coherence on these issues, particularly in the face of China’s digital authoritarianism, India stands to benefit significantly through cooperation with the U.S. on this issue, as it looks ahead to hosting the G20 in 2022. Both sides should closely engage with private sector stakeholders, both digital providers and digital-investing manufacturing, to ensure constructive policies.
The two sides should add trade and environment to the TPF agenda or open up a separate dialogue on climate issues. Given their shared interest in these issues, they should use this forum to coordinate on new proposals to promote trade in environmental goods and services and coordinate on approaches to sustainable trade and finance, in addition to cooperation in other bilateral and multilateral environment fora. Both sides should promote circular economy approaches that will secure investment on critical environmental needs, such as waste management, that will improve environment and create further economic investment and job creation.
India is increasingly imposing local content restrictions for government procurement, which impacts procurements at all levels of government. India is not a party to the WTO Government Procurement Agreement and with U.S. Buy American restrictions in the Federal Acquisition Rules there are very restricted opportunities for Indian vendors to participate in most U.S. federal tenders. A solution is needed to open up the markets in both countries, even if on a limited and even sectoral basis. India is not likely to join the WTO agreement and consequently a bilateral solution that could be tailored to directly address both governments’ concerns, should be explored.
USTR officials at the Assistant United States Trade Representative (AUSTR) level can make important progress on priority issues, working with their counterparts in the Ministry of Commerce and Industry. However, for this to happen the principals will first need to demonstrate their support and agree to a Scope of Work. Areas ripe for advancement include, IP, TBT issues, trade facilitation, and agriculture regulatory cooperation. Both sides should commit to open, transparent stakeholder consultation in order to identify and prioritize commercially-meaning priorities. AUSTR-Additional Secretary/Joint Secretary engagement should be through frequent “intersessional meetings.” Industry stands ready to support these efforts in providing subject matter experts and whatever tactical support is necessary.
Intellectual Property Rights
Innovation and commercialisation are economic drivers of the economy. The US and India partnership is the most important geopolitical and commercial partnership that India has with any country. Enhanced engagement on Intellectual Property Rights (IPR) in order to reaffirm both US and India’s commitment to continue making concrete progress on IPR concerns with sustained dialogues on Copyrights, Patents, Trade Secrets, Traditional knowledge and the Traditional Knowledge Digital Library (TKDL). We believe that with the United States Patents and Trademarks Office (USPTO) and the Department for Promotion of Industry and Internal Trade (DPIIT) recently signing a Memorandum of Understanding to cooperate on intellectual property examination and protection and to strengthen the IP systems in both countries will further culminate into the realisation of a robust IP landscape.
In addition to IPR being a subject under the Trade Policy Forum, both countries could commit to a bilateral IP dialogue in order to signify the importance of innovation and creativity. A larger emphasis on a partnership such as this will ensure robust and balanced IPR protection in fostering creativity, promoting innovation whilst taking into account the interests of all stakeholders including the public.