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US-India free trade agreement expected to further strengthen bilateral trade

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Ajot - 25 November 2019

US-India free trade agreement expected to further strengthen bilateral trade
by Manik Mehta

India is working towards concluding a free trade agreement with the United States, particularly after Prime Minister Narendra Modi recently announced in Bangkok that India was dropping out of the China-led Regional Cooperation and Economic Partnership (RCEP) which comprises of the 10 ASEAN member states, China, Australia, New Zealand, South Korea and Japan.

India’s commerce and industry minister Piyush Goyal, who held recent talks with senior American officials, said that both India and the U.S. were “optimistic about the free trade agreement even as certain issues need to be discussed further”.

India is trying to get the Trump administration to remove U.S. tariffs on steel and aluminum imports from India as well as the restoration of special preferential trade benefits under the Generalized System of Preferences, which was suspended in June. The U.S., on its part, would like greater access to the Indian market for dairy products and medical devices, and lower Indian tariffs on information technology products, etc.

According to the Office of the U.S. Trade Representative, U.S. goods and services trade with India totaled an estimated $142.6 billion in 2018. Exports were $58.7 billion; imports were $83.9 billion. The U.S. goods and services trade deficit with India was $25.2 billion in 2018.

India also benefited, though not in a big way, from the ongoing US-China trade war; India’s exports to the U.S. rose by $ 755 million in the first half of 2019, according to UN Conference on Trade and Development (UNCTAD); though the trade diversion resulting from the US-China trade war was “smaller compared to some other countries, (it was) still substantial”.

According to a recent U.S. Congressional Research Service (CRS), U.S.-India bilateral trade in goods and services is about 3% of U.S. world trade, and has grown in recent years. The trade relationship is more consequential for India; in 2018, the United States was its second largest export market (16% share) after the European Union (EU, 17.8%), and third largest import supplier (6.3%) after China (14.6%) and the EU (10.2%). Defense sales also are significant in bilateral trade. Civilian nuclear commerce, stalled for years over differences on liability protections, has produced major potential U.S. supply contracts. Two-way trade amounted to roughly US$ 125 billion in 2018, with indications of growth ahead, particularly after the FTA’s finalization.

 source: Ajot