From state visits to closer economic connections
Context:
- The official visit to Washington by Prime Minister Narendra Modi on June 22, 2023, was important since it was the first for an Indian head of state in 14 years and only the third for an Indian leader in the 75 years since Indian independence.
The significance of trade:
- In comparison to considerable achievements in many sectors, the two countries’ economic, and particularly trade, connection is growing — surpassing US$120 billion — but it continues to underperform in comparison to the great potential.
- If this strategic partnership lives up to its billing as one of the most significant of the century, trade will become increasingly crucial as the US-India tale unfolds.
- India is exhibiting an extraordinary openness to develop new economic partnerships with significant countries worldwide.
The United States’ approach:
- The Biden administration, on the other hand, feels it has abandoned FTAs in favour of a better trade strategy that emphasises resilient supply chains, reshoring or friend-shoring, and championing labour rights and climate-friendly production over craven and misguided globalisation.
- This strategy has many critics both at home and abroad, particularly because it ignores the fact that all of these objectives might be addressed aggressively in a modified FTA agenda.
- It is past time for the Trump administration to reach an agreement with India on trade policy before the strategic side of the relationship falls far behind the trade side.
- Modi’s State visit resulted in considerable progress on six World Trade Organisation (WTO) problems.
- Building on these achievements and anticipating advantageous periods following national elections in both countries in 2024, trade negotiators on both sides must be granted a more ambitious mandate by their respective governments.
India’s Trade Development:
- India is making progress in negotiating FTAs with its other economic partners through its initiatives at the Atlantic Council.
- To date, India’s agreements fall well short of the gold standard set by the United States, especially the United States-Mexico-Canada Agreement (USMCA), however the gaps are shrinking.
- Even in the sensitive subject of agriculture, India has shown an extraordinary willingness to gradually open its market when given with the promise of gaining concessions in exchange through FTAs.
- Under the Economic Cooperation and Trade Agreement, Australia acquired significant market share in India for wine, wool, and sheep meat, among other commodities, while India received nearly duty-free access to the Australian market.
- In practise, even in the absence of an active FTA negotiation, the US and India have been able to agree to transactional concessions in their respective markets (for example, mangoes and pomegranates for India in return for cherries, hay, and pigs for the US) via the bilateral Trade Policy Forum (TPF).
The next steps:
- The Prime Minister’s State visit should pave the way for a more ambitious trade agenda in the future. Trade negotiators in the United States and India are already skilled at starting small and getting results.
- However, the trade partnership necessitates greater work and a stronger mandate from the Biden and Modi administrations.
- The frequently touted goal of $500-600 billion in bilateral trade by 2030 can be easily met and exceeded with greater ambition.
