Two steps forward, one step backward

Frictions in Indo-U.S. trade despite growth.

By R. Chandrasekaran and Dileep Thekkethil

Addressing the media at the conclusion of the fourth India-U.S. strategic dialogue in New Delhi on Monday, Secretary of State John Kerry and Minister of External Affairs Salman Khurshid described a laundry list of issues they talked about. But of the nearly 6,000 words the two top diplomats uttered at their press conference, one sentence kind of stood out.

“We can break down trade and investment barriers, and I was particularly appreciative of the productive discussion that we had on those issues,” Kerry said.

Trade and economic relations between India and the United States have never been better. Bilateral trade in goods and services reached nearly $100 million last year, driven by higher economic activities. Trade in goods has already reached $60 billion and it could very well reach $100 billion in the coming years.

READ: U.S.-India trade in goods surges to $5.7 billion in April

However, there are plenty of issues where both sides are not on the same page.

In the days leading up to the talks, the U.S side had openly complained about lack of intellectual property protection in India and New Delhi’s protectionism. Kerry’s use of the b-word was significant in that respect.

However, the United States was not the only side complaining about protectionism.

There are talks in Delhi about dragging Washington to the World Trade Organization over the new immigration bill that is being debated in U.S Congress at the moment.

One reason the difference on the trade front is growing because both nations are content on protecting their interests in the face of uncertain global economic conditions.

India has dithered for a long in opening up retail sector to foreign direct investment. India’s fear is understandable as even skilled graduates could not find employment after leaving colleges, leave alone the unskilled laborers.

The United States, too, is concerned more about the job security of its citizens than being fair to its trade partner. The growth of outsourcing of jobs to India has been an emotional issue in the country. It remained one of the dominant issues in the last three presidential elections. This is one of the reasons the new immigration bill goes out of the way to punish Indian IT firms.

There is bewilderment in India about the United States, the world’s leading economy, falling back to protectionism.

However, even as the countries level allegations against each other, trade and investments between them are expected to grow with the U.S. companies willing to take advantage of reforms in sectors like retail and defense.

The two sides seemed to be sorting out a major irritant, with Westinghouse and the Nuclear Power Corporation of India set to reach an agreement on setting up a nuclear reactor in India.

“We talked about commercial enterprises and we talked about some of the impediments to joint investment and to foreign investment,” Kerry said at the press conference on Monday. “And we were reassured, certainly from our part, that India is taking important steps to try to address each of those concerns, and that we are committed to taking steps to address the concerns of our friends in India. And there [are] always mutual concerns.”

Of course, that last sentence aptly summed up the bilateral trade relations.

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