US-India trade relations may be less strained under Biden

US-India relations

H-1B visa policies key issue for India in engagement with new Biden-Harris administration.

US temporary visa policies, which affect Indian nationals working in the US, is a key issue for India as it gets ready to engage with the administration of President-elect Joe Biden, according to a new Congressional report.

India was monitoring potential US action to revise the H-1B (specialized worker) visa program under the outgoing Trump Administration, the report by bipartisan Congressional Research Service (CRS) noted.

Additionally, India continues to seek a “totalization agreement” to coordinate social security protection for workers who split their careers between the two countries, it said.

Noting that the US and India are competitive in certain services industries, CRS said barriers to US firms’ market access include India’s limits on foreign ownership and local presence requirements.

“Biden has expressed interest in cooperating with Indian Prime Minister Narendra Modi on global challenges, but it is uncertain what priority the new Administration will place on bilateral trade issues,” the report said.

RELATED: No thaw in US-India tariff war (June 19, 2020)

Some analysts expect that US- India trade relations may be less strained, but that Congress and the new Administration will continue to seek resolution to ongoing trade frictions in the bilateral relationship, it said.

Market access and other barriers to trade with India have been long-standing concerns among some Members of Congress and US exporters, and successive US Administrations, CRS said.

Efforts under the Trump Administration to reach a limited bilateral trade deal to address certain frictions did not conclude, it noted.

Listing a few selected issues, CRS report noted that under the Trump Administration, bilateral tensions increased over each side’s tariff policies even as US and India held concerted negotiations to address trade frictions, CRS said.

A potential trade deal could include partial restoration by the United States of India’s GSP benefits in exchange for certain market access commitments, it said citing press accounts. “Yet, the long- expected limited trade deal has not materialized to date.”

Negotiations under prior Administrations on a bilateral investment treaty (BIT) are stalled due to differences on approaches on investor protections, it said.

READ: Contrary to conventional wisdom, Trump hasn’t been great for India — Biden will be (August 19, 2020)

India aims to attract foreign investment and has made FDI reforms, such as raising foreign equity caps for insurance and defense, and other strides to improve its business environment, CRS noted.

US concerns about investment barriers persist nevertheless, heightened by new Indian restrictions on how e-commerce platforms such as Amazon and Walmart-owned Flipkart conduct business, it said.

From the US view, India’s weak regulatory transparency and other issues, such as IPR and localization policies, add to concerns about FDI barriers.

Two-way US-Indian FDI is linked to US jobs and exports in a range of sectors, yet US FDI in India prompts some offshoring concerns, the report said.

CRS noted US and India have signed defense contracts worth more than $20 billion since 2008, up from $500 million in all previous years combined.

Major anticipated deals include an Integrated Air Defense Weapon System valued at nearly $2 billion and 30 MQ-9B SkyGuardian drones worth more than $3 billion, it noted .

India is eager for more technology-sharing and co-production initiatives, while the US urges more reforms in India’s defense offsets policy and higher FDI caps in its defense sector.

READ: Shekar Narasimhan: Biden is sane, sensible and understands India; he’s better for New Delhi (October 8, 2020)

However, India’s multibillion-dollar deal to purchase the Russian-made S-400 air defense system may trigger US sanctions on India under the Countering America’s Adversaries Through Sanctions Act, it said.

With India’s growing integration in the global economy, some policymakers have called on India, like China, to be a more responsible stakeholder in the rules-based global trading system, CRS said.

They blame India for impeding WTO progress on issues such as e-commerce customs duties and fisheries subsidies.

India previously blocked the Trade Facilitation Agreement (TFA), which ultimately entered into force in 2017, until a compromise was reached on treatment of certain food security programs.

The US and some developed countries also are critical of India, China, and others for self-designating as developing countries to claim special and differential treatment under WTO rules— criticisms that these countries refute, the report said.

READ: With Trump behind in polls, India appears to be preparing Plan B (September 24, 2020)

Listing potential issues for Congress, CRS asked what aspects of bilateral trade relations would change or remain the same in a Biden Administration?

Also what trade issues should the US and India prioritize in any future talks? Is there potential for broader trade agreement negotiations?

Will India and the United States renegotiate reentry into the Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans- Pacific Partnership (CPTPP), respectively, or potentially seek other ways to engage on regional issues?

Are there opportunities for the United States and India to bridge differences on multilateral trade issues?

READ MORE:

Trump’s India visit: More symbolism than substance (February 28, 2020)

India trade deal eludes Trump; $3 billion defense pact inked (February 25, 2020)

RELATED: A trade deal is needed to strengthen U.S.-India strategic ties (February 24, 2020)

Trump visit demonstrates ‘strong and enduring ties’ with India: White House (February 22, 2020)

Indian Americans emerge as key constituency in battleground states (August 23, 2020)

Trump’s India visit: An election oriented trip to court Indian American voters (February 21, 2020)

Rep. Brad Sherman’s exceptional record on US-India ties speaks for itself (November 27, 2020)

Rich Verma: Neither U.S., nor India ‘aspires to have a military alliance’ (October 19, 2020)

US-India bilateral meeting on April 11 to settle trade disputes (April 6, 2018)

Trump should tone down his rhetoric on trade, otherwise world will call his bluff (April 9, 2018)

US-China trade war will hurt India: Gita Gopinath (March 26, 2018)

Tastes like chicken: how a trade war affected US economy in the past (July 13, 2018)

 

One Comment

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