In recently held discussions between India’s Trade Minister Suresh Prabhu and US Commerce Secretary Wilbur Ross, both nations have decided to enhance their economic ties and address pending issues through continuous official dialogues. Notably, despite being India’s largest export market, the US ranks India as its 13th largest owing to “restrictive market access barriers”.
Tariffs: a Major Bone of Contention
The imposition of tariffs has created bilateral tensions. The US has levied a 25% tariff on steel and aluminium, which India has considered countering with retaliatory tariffs. The US has identified multiple market barriers in India, encompassing tariff and non-tariff restrictions, alongside several practices disadvantaging foreign firms. In response, India is mulling over challenging the tariff hikes at the World Trade Organization (WTO). President Trump has labeled India as a “high-tariff nation”, criticizing the existing tariff imbalances.
The Impact of Generalised System of Preferences (GSP) Programme
The US’s recent move to revoke duty-free benefits provided to Indian exporters under the GSP programme has raised concerns. India being the top beneficiary of GSP, saw 11% ($6.3 billion) of its US merchandise imports, including chemicals, auto components, and tableware, get covered in 2018. This decision to remove GSP will lead to a reinstatement of US tariffs.
Service Industry Concerns Amid Temporary Visa Policies
India constantly battles with the US’s transitory visa guidelines which impact Indian workers in the US. The WTO currently hosts India’s challenge against the US’s worker visa fees and possible modifications to the H-1B visa scheme. Moreover, India pushes for a “totalization agreement” to ensure social security for workers splitting their careers between the two countries.
Conditions in Agriculture
India’s sanitary and phytosanitary (SPS) obstacles limit US agricultural exports. Despite this, both nations view each other’s agricultural support engines as market-distorting.
Differing Views on Intellectual Property (IP)
India and the US differ on the way to strike a balance between IP protection to promote innovation and other policy objectives such as access to medicines. India continues to remain on the “Special 301” Priority Watch List for 2018 due to concerns such as its patent treatment, infringement rates, and trade secrets protection.
“Forced” Localization Criticism from the United States
The US lobby continues to challenge India on its “forced” localization actions. India’s initiatives to boost its manufacturing base by requiring in-country data storage, domestic content protection, and domestic testing in some sectors have been met with resistance.
| Top Exports of India to US | % of India’s Total Exports to US |
|---|---|
| Chemicals | 24% |
| Auto Parts | 18% |
| Tableware | 9% |
US’s Perception on Investment Barriers
New Indian restrictions on e-commerce platforms such as Amazon and Walmart-owned Flipkart have heightened US concerns about investment barriers.
Reform Expectations in Defence Trade
The US is keen on seeking more reforms in India’s defence offsets policy and higher foreign direct investment limits in its defence sector.
Understanding Key Trade Terms
The GSP is a US trade programme designed to boost economic growth in developing nations by providing preferential duty-free entry to around 4,800 products from 129 selected beneficiary countries. The Totalization Agreement is an agreement between two countries aiming to prevent duplicate social security contributions for the same income. The Defence Offset Policy is a part of the Defence Procurement and Procedure (DPP) 2016 which mandates foreign suppliers to spend at least 30% of the contract value in India. Lastly, the Special 301 Priority Watch List is an annual report released by the United States Trade Representative (USTR) assessing trading partners’ protection of intellectual property rights and their notorious market lists.
