7 PM | Trade issue between India and US | 10 February, 2019


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Context

There is apprehension in India over a possible decision by the U.S. Trade Representative to withdraw the Generalised System of Preferences status

Status of India US trade relation

* For India, United States was its second largest export market (16% share) after the European Union (EU, 17%), and third largest source of imports (6%) after China (17%) and the EU (10%) in 2017.

* Bilateral trade in goods and services is about 2% of U.S. world trade, but tripled in value between 2005 and 2017, reaching $126 billion

* Bilateral trade frictions exist on numerous fronts, but many observers believe bilateral commercial ties could be more extensive if trade and investment barriers were addressed.

Trade Issue between India and US

  1. Trade Balance: The Trump Administration views bilateral trade balances as an indicator of the health of a trading relationship, and has criticized India for a range of unfair trading practices. India rests on the trade relationship in favour of India: Indian exports to the U.S. in 2017-18 stood at $47.9 billion, while imports were $26.7 billion. India favors taking a broader view of their trade ties beyond the trade balance.
  2. Tariffs: In March 2018, the U.S. began imposing tariffs on several Indian products. In retaliation, India proposed tariffs on US goods (e.g., nuts, apples, steel, and motorcycles), but has put off implementing these five times in the past year in the hope that a negotiated trade settlement will come through.
  3. Generalized System of Preferences (GSP): In April, the United States launched a review of India’s eligibility for GSP. GSP accounted for 12% ($5.6 billion) of U.S. goods imports from India in 2017.

 

Generalized System of Preferences (GSP)

The Generalized System of Preferences (GSP) is a developed countries trade program designed to promote economic growth in the developing world by providing preferential duty-free entry. In US, GSP was instituted on January 1, 1976, by the Trade Act of 1974.

 

  1. Services: For India, a key issue is U.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.
  2. Agriculture: Sanitary and phytosanitary (SPS) barriers in India limit U.S. agricultural exports. Recent issue is India’s purported compliance with a WTO decision against its ban on U.S. poultry imports and live swine due to avian influenza concerns; the WTO held that India’s measures violated WTO SPS rules.
  3. 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’s IP regime remains a top concern for the United States, which designated India again on its “Special 301” Priority Watch List for 2017.
  4. Localization Trade Barriers: The United States continues to press India on its “forced” localization practices.
  5. Investment: India has made FDI reforms, such as raising foreign equity caps for insurance and defence, but barriers remain in multi-brand retail and other sectors.
  6. New e-commerce rules: The move disrupted product listings on Amazon & Walmart and forced it to change its business structures.

Steps Taken

* India has attempted to address the trade deficit with purchase of American oil, energy and aircraft.

* The US and India reportedly are in intensive negotiations to address key trade issues, such as on the U.S. steel and aluminium tariffs and India’s GSP status.

* As WTO members, the United States and India negotiate multilaterally to liberalize trade, but unable to reach a conclusion yet.

Conclusion

* Both sides should establish a joint mechanism to address bilateral trade issues, with regular meetings of senior officials as well as a commitment to ensure new market access in time bound manner

* India must keep in mind U.S.-China trade war, and if a trade deal with the U.S. is reached, India could be the biggest beneficiary of business deals lost by China.

 


Source: https://www.thehindu.com/opinion/editorial/no-zero-sum-games/article26231336.ece

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