US-India Ties in 2021

• Restart the “Pivot to Asia”While India can play an important role in the region, it is being left behind economically and strategically. The strength of the bilateral strategic relationship provides the United States with a strong base of support to expand. U.S. leadership in the region can address China’s growing influence and could help mitigate the growing animosity between China and India.
• Leverage the Progress of the Quad and Similar GroupingsIndia has express willingness to find common ground with small groupings of countries on like-minded issues. These vehicles can be harnessed where bilateral cooperation has stalled or India’s recalcitrance in the International multilaterals is counterproductive. The Japan-India-US-Australia group can be used to advance U.S. national security and commercial interests. The U.S. might also consider joining in the supply chain group of India-Singapore-Australia.
• Focus on Issues of Common GroundIn addition to the national security strategic interests India has embraced the values of climate change and joint programs in addressing air pollution, water and other environmental issues can be accelerated, especially R&D programmatic elements. Cyber security and Internet governance present another opportunity with India recently expressing opposition to China’s New IP proposal, support for the multi stakeholder approach to Internet governance and a desire to see the UN Group of Government Experts make clear progress on cyber. India’s ambitions in 5G and their stated desire to secure trusted vendors provide another opportunity that melds with U.S. national security and commercial interests.
• Re-Commit to the Bilateral DialoguesThe 2+2 Strategic Dialogue is productive and can be expanded to include commercial issues of national security interest. The State-led ICT Working Group, an important engagement on technology and digital policy issues, has floundered as the dialogue has been downgraded to a deputy assistant secretary level. This group needs to be upgraded to a Dialogue held at least at an Assistant Secretary level, or as a best case at an Under Secretary level.

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:

• Conclude a small trade package that would restore India’s GSP benefits: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. 
• Cooperate on supply chain resilience:  Cooperation on trusted supply chains should start with pharmaceutical and medical devices, given the continuing critical importance of using trade to respond to COVID-19 and the potential synergies between the countries’ industries in these sectors.  The Biden Administration has made clear it is interested in such discussions as part of its diplomatic dialogues with key allies to open markets for U.S. exports and to reduce allies’ dependence on critical supplies from China and Russia.  As such, these discussions could support pharmaceutical and medical devices supply chain resilience and create opportunities for engagement and possible understandings on related issues.  These could include intellectual property and such digital trade issues as data flows and artificial intelligence, including in pharmaceutical R&D.  The U.S. and India could then broaden this cooperation potentially to include other countries and/or other sectors.
• Cooperate on efforts to encourage domestic production:  Both Administrations have stated efforts to encourage more domestic production.  The Administrations should coordinate to ensure that these efforts are based on incentives and economic reform to encourage sustainable investment while also ensuring more dependable access to supply chains including necessary raw materials AND downstream customers.   Ensuring a constructive, balanced approach will help to eliminate emerging trade barriers and to source and sustain job-creating downstream manufacturing production. 
• Coordinate on digital trade issues:  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.
• Cooperate on environment issues:  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.
• Cooperation in government procurement: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.
• Unlock the opportunity for progress at the working level: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.

Two key trends have continued to define US-India defense relations for the past 15 years: increasing strategic alignment, especially with regard to China and defending a free and open Indo Pacific; and steadily increased defense cooperation, to include defense trade, military exercises and technology partnerships.

The dramatic escalation of tensions between India and China in 2020 creates an unprecedented moment of convergence in the first area. The signing of the Major Defense Partnership framework at the end of the Obama Administration and conclusion of four long- pending defense agreements on logistics, communications, industrial security and geospatial intelligence under the outgoing Trump administration set the stage for more ambitious cooperation.

The major challenges are budget constraints in the wake of COVID; differences in US and Indian approaches to the region, especially to Afghanistan and Pakistan; and how the new U.S. administration manages concerns about India’s human rights record. Some top priorities for the Biden administration in its strategic alignment with India will include: 

• Further strengthen cooperation on terrorism and maritime security and start to Institutionalize military and intelligence cooperation related to China.
• Expand “Quad” activities of the US, India, Japan and Australia, to include some work with additional countries.
• Fully implement the “foundational” agreements and address any obstacles
• Manage sanction risks under CAATSA
• Support US defense industry efforts in India, including efforts to win contracts for offensive platforms like fighter jets.
• Rapidly accelerate defense technology cooperation through the DTTI and other mechanisms, such as a joint fund for defense technology innovation.
• Explore creative tools to assist India in its continued defense modernization in the wake of the COVID crisis such as additional leasing agreements

• Deepen Energy Ties Between our Two Countries by Supporting the Development of the US-India Hydrogen Task Force.The high-level bilateral Task Force representing industry and government assembles to assess technology status, study innovative policy options and make recommendations. The U.S. Department of Energy (DOE) and Indian Ministry of New and Renewable Energy (MNRE), in coordination with the U.S.-India Strategic Partnership Forum would report its findings under the U.S.-India Strategic Energy Partnership (SEP).
• Assist India with Meeting its Climate Change Goals and Modernizing their Power System.As India pursues its ambitious renewable energy targets and seeks to transform its  energy sector. Industry and government are collaborating on the deployment and  integration of renewable energy and new technologies into the grid; modernizing  the power distribution sector; supporting state-level planning for renewable  energy; deploying distributed energy technologies, electric vehicles, rooftop solar,  and battery storage; redesigning markets and increasing off-grid energy access.
• Promote Energy Trade and InvestmentThe US-India Gas Task Force (GTF) was set up under the umbrella of U.S.-India SEP with support from MoPNG and US Department of Energy. It was born to support the Government of India (GOI) and U.S. Government (USG) in their respective goals of expanding India’s gas sector and promoting exports of U.S. goods and services. Work is also underway to enhance flexible operations of power plants needed to address increased renewable energy penetration and variable power demand to minimize operating costs and failure risks.
• Climate Action The appointment of John Kerry to a newly created climate envoy position signals the commitment of the Biden-Harris administration to restoring the United States’ global leadership on climate change. It also indicates that the U.S. government will treat climate change not only as an environmental challenge but also as an increasing threat to national security. Joe Biden will also pledge to re-join the Paris climate agreement.
• Clean Energy and InfrastructureDuring his Presidential campaign, Joe Biden outlined a Clean Energy Revolution plan – to address the threat and lead the world in addressing the climate emergency. Biden is proposing to make U.S. electricity production carbon-free by 2035 and to have the country achieve net zero emissions by the middle of the century. Once in office, Joe Biden has promised to spend $2 trillion over four years to drive down emissions by upgrading four million buildings to make them more energy efficient, thereby setting U.S. on a course to meet the ambitious climate progress. He also wants to spend heavily on public transport, to invest in electric vehicle manufacturing and charging points and give consumers financial incentives to trade up to cleaner cars.Joe Biden also announced a Build Back Better plan which promises to launch a national effort aimed at creating the jobs needed to build modern, sustainable infrastructure, which takes into consideration the climate challenges, and deliver an equitable clean energy future.Biden administration will continue to further the work of U.S.-India Strategic Energy Partnership, especially initiatives that will contribute to President Elect’s clean energy vision. One such initiative is the U.S.-India Hydrogen Task Force, which will be launched jointly by the U.S. Department of Energy and the Indian Ministry of New and Renewable Energy and convened under USISPF.
• Gender EmpowermentPresident-elect Biden is keen to keep women at the center of all aspects of his administration and policies. The Biden administration believes that every issue is a women’s issue and will formulate policies and programs to that effect. One such initiative by USISPF, and supported by USAID, is South Asia Women in Energy (SAWIE) that aims to increase the representation of women at the leadership levels in the energy, infrastructure and manufacturing industries in the South Asia region.

In 2021, the economic and financial ties between the United States and India will 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, 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. To make the most of this strategic relationship, the incoming Biden administration will need to focus on three main priorities in the coming year.

• Restore Regular Bilateral Engagement The first priority lies in restoring regular bilateral engagement with senior Indian economic policymakers. An investment in regular meetings will allow for a deeper relationship that looks beyond short-term bilateral irritants and focuses on the larger, long-term shared interests. These regular meetings will lay the foundation for cooperation on issues of global financial stability, sustainable development, and regulation of the emerging digital economy. They would also renew the US-India Economic and Financial Partnership (EFP), which is key to addressing policy and regulatory issues in the insurance and banking sectors, taxation, capital markets, digital payments, and illicit finance, plus important economic challenges surrounding immigration, access to health care and education, and land and labor market reform.
• Deepen Long-term Financial TiesA second priority lies in deepening the long-term financial ties between our countries. While the EFP and other bilateral engagements can focus on strengthening the investment climate, it will be US private investors who provide the long-term capital India needs to finance sustainable development and growth. The Indian government is already actively courting US investment through its $1.7 trillion National Infrastructure Pipeline (NIP) and quasi-sovereign National Investment and Infrastructure Fund (NIIF). The Biden administration can respond by facilitating investor contacts, helping India strengthen its investment climate, and directing momentum toward investments in renewable energy and related infrastructure. These efforts could also address issues of supply chain resiliency as a component of sustainable investment across Asia.
• Strengthen Digital Finance and CommerceA third priority relates to the challenges posed by rapid technological advances in finance, including regulation of digital financial data, “fintech” innovations in banking, insurance, and payments, secure online identity, and the evolution of digital fiat and cryptocurrencies. As the future of finance in the global economy depends on the secure and frictionless transfer of data across borders, finance officials in the US and India will need to work together to define a common cross-border standard. The symbolism of the United States and India cooperating on this difficult issue would be quite powerful, and the resulting standards would have important benefits for the financial industry, the global financial architecture, and national security.

The US-India healthcare partnership is based on the compelling need for improved healthcare, greater access, affordability and early availability of advancements in modern diagnostics, medicines and treatments for both the populations. While India supplies over 40% of the US generic demand and, in doing so, reduces the healthcare costs of the country, US has helped India with access to the latest advancements in medical technologies, devices, new innovative medicines and access to cutting edge medical science to serve unmet healthcare needs of its population. In future this partnership will be critical for robust public health ecosystem and below are three critical areas suggested for new US administration to engage with India on priority.

The United States and India need to explore healthcare partnership models for robust disease surveillance & data sharing, focus on investments in healthcare research to prepare and fight against new pathogens, assured supplies at the time of global crisis, and development of new hubs of pharmaceutical manufacturing.

• Strengthen Pharmaceutical Manufacturing Diversifying supply chain and imports from trusted partners should be the key priority for the new administration. While on-shore manufacturing should be strengthened by all means and encouraging Indian manufacturers to setup manufacturing in US, leveraging manufacturing strength of India to maintain resilient supplies of affordable drugs from India should be part of overall strategy. Outside US, India is hub for largest US FDA approved manufacturing facilities. Given its technical maturity, skilled manpower, affordable labour, investments and policy boost by government, India could be a preferred destination for US manufacturers for relocation and establishment of manufacturing base not only to serve India’s huge market but also exports to the US for secure supplies.Exclusive bilateral trade agreements securing reliable stable supplies, assured long term contracts to manufacturers and support to Govt of India in ramping up its domestic productions by growing number of US FDA complying facilities should be a common agenda of utmost importance for both the countries.
• Enhanced Cooperation and Collaboration in Medical Device SectorPrioritize closure on Trade Margin Rationalization, continued access to advance technologies to Indian population and supporting Indian government in its Make in India drive through collaborative research and technology co-operations in medical devices should be among top priorities for Biden administration for India. To encourage domestic manufacturing, recent policy amendments by Government of India not only restricts access to high risk medical devices to a large section of population but also discourage US industry to investment in India. We recommend frequent dialogues between the new administration and the Government of India to establish partnerships in these sectors. India will also need to remain committed to maintaining a stable policy environment.
• Strengthening Investments Climate in IndiaThe Indian government is already actively courting US investment through lucrative policies and incentives to boost domestic manufacturing of devices, pharmaceuticals and biopharmaceuticals and ancillaries. India will need to address key concerns of investors like regulatory predictability, progress on joining regulatory harmonization with global standards, protection for innovations and rationalized pricing policies addressing access, affordability without compromising on business sustainability. Joint working groups between US and India to share technical expertise and best practices on regulatory and manufacturing advancements would allow greater investments to India and help US in enhanced access to affordable quality products for its population.

US-India agriculture cooperation increasingly important role in the relationship but flashpoints remain with regard to market access for US agriculture products entering India. The U.S.-India Trade Deal remains deferred until the two sides agree on the tariff & non-tariff barriers imposed on agriculture products by both governments. With the incoming Biden-Harris Administration, it remains imperative to ensure that the dialogue on trade continues and it also provides an opportunity to engage on some new of the initiatives including:

U.S- India Agri Supply Chain Initiative: With the passage of the three farm laws namely, The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020; The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020; and The Essential Commodities (Amendment) Act, 2020, there is an opportunity for capacity building and knowledge sharing between US & India as the farmers get the opportunity to work directly with the private sector. Though the ongoing farmers’ protest creates a wait and watch situation for the private sector, we remain hopeful that once resolved, it also provides a huge opportunity for introduction of newer technologies in the agriculture supply chain in India.

Industry is encouraged by President-elect Biden’s pledge to reverse the Trump Administration’s stance on a wide array of immigration policy, including the temporary ban on the entry of green card applicants as well as nonimmigrants seeking entry in the H-1B, L-1, J-1, and H-2B visa categories. In addition, the Trump Administration’s prevailing wage rule from DOL and its H-1B wage prioritization rule from DHS were both issued as midnight rules in the final two weeks of the Trump presidency.

The rules seek to favor those in the highest wage levels despite the fact that many recent graduates work in fields—such as science and medicine—that are essential to America’s economic recovery and its battle against COVID-19. For example, a hair stylist or hotel manager in wage level 4 making $75,000 in a rural area would be considered whereas a vaccine researcher, doctor or software architect making $150,000 or more but at a lower wage level would not be considered. Using wage as the sole proxy could prevent these essential workers from entering the country. Both rules should be immediately frozen and ultimately undone through the appropriate regulatory process. In addition, the Biden Administration should drop any defense of Trump’s restrictions in court and move to review and rescind the restrictive policies on high-skill immigration and PERM that Trump put in place at USCIS, DOS Consular Affairs, and DOL ETA through policy memorandums.