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Growing India-US Trade Ties Under Biden Government
Context:
Boosted by PM modi state visit
About Biden trade policy:
- Biden’s Continuation of Trump’s Trade Policy: President Joe Biden continued with Donald Trump policy, particularly those impacting both allies and adversaries equally.
- Strengthening Trade Sanctions on China: Rather than easing tensions, Biden further reinforced the trade sanctions against China that had been initiated under Trump.
- “Friendshoring” Strategy is focusing on diversifying supply chains away from countries with geopolitical risks, particularly China, and strengthening ties with trusted partners like India.
- Supply Chain Redundancies: highlighted the creation of redundancies in the US supply chain to reduce over-concentration risks and address reliance on manufacturers that conflict with US human rights values.
- Focus on Domestic Industries and Anti-Globalisation: Biden prioritised domestic workers and businesses, supporting anti-globalisation sentiments in the West and providing subsidies to revive key industries like semiconductors, which some experts view as part of a “new” Washington Consensus.
- Rejection of the Trans-Pacific Partnership (TPP): Despite his involvement in the Obama administration’s push for the Trans-Pacific Partnership, Biden, as President, showed no interest in reviving the deal.
- Indo-Pacific Economic Framework (IPEF): Biden introduced the Indo-Pacific Economic Framework (IPEF) to enhance economic cooperation in the region, serving as a strategic counterbalance to China’s rising influence.
Bidens trade policy with India:
- Conciliatory Approach: The Biden administration adopted a more accommodating stance toward India.
- Revival of Trade Policy Forum: Both nations resumed the annual Trade Policy Forum talks in 2021 after a four-year hiatus.
- Indo-Pacific Economic Framework (IPEF): India joined three out of four pillars of the IPEF but opted out of the trade pillar negotiations.
- India’s Crude Oil Purchase from Russia: India’s decision to buy discounted oil from Russia for energy security initially caused tensions, but the US later recognised India’s strategic and economic needs.
- Increased Investments During Biden’s Presidency: Ajay Srivastava from the Global Trade Research Initiative noted that American companies significantly invested in India during Biden’s presidency, aligning with the China Plus One strategy.
- Key Investments: Under Biden, companies like Apple began manufacturing iPhones in India through Foxconn, and Micron announced investments in India.
Impact of Biden’s conciliatory trade policy with India:
- 50% Growth in Merchandise Trade: India’s bilateral merchandise trade with the US grew by 50%, reaching $120 billion between FY21 and FY24.
- Potential for Increased Bilateral Trade: US Ambassador Eric Garcetti projected that India-US bilateral trade (goods and services) could grow to $500 billion annually, up from the current $200 billion.
- Growth Drivers: This potential increase is expected to be driven by direct investments, joint ventures, partnerships, educational exchanges, and tourism.
Steps taken to resolve India- USA trade issues:
- During that state visit in June last year, the United States and India announced resolutions on key trade issues, including the termination of six disputes (and later another pending dispute) at the World Trade Organisation and
- India’s removal oftit-for-tat tariffs on certain US products such as chickpea, lentils, almond, walnut, apple,and boric acid.
- Bipartisan Support for Anti-China Trade Policy: There is now bipartisan support in the US for anti-China trade policies, which India can further leverage.
Challenges in Trade Relations:
- Selective US Support under China Plus One: US support for India under the China Plus One strategy has been selective.Example: The US opposed India’s restrictions on laptop imports.
- Pending Issues:
- Trump-era Tariffs: National security tariffs on India’s steel and aluminium exports to the US are still in place.
- Generalised System of Preferences (GSP): India’s request for the restoration of GSP status for duty-free exports remains unresolved.
- Totalisation Agreement: Negotiations to prevent double social security contributions by Indian tech workers in the US are still pending.