US Trade Representative (USTR) Katherine Tai’s visit to India was certainly not a routine one. It covered an unusual amount of ground in moving forward on bilateral trade concerns and cooperation on emerging issues. The coverage reflected the seriousness with which the US and India are looking to handle their trade partnership in the days to come.
Trade has been an area of divergence between both countries. Notwithstanding robust engagement in other spheres of global and regional geopolitics and geo-economics, trade has been a rare sore spot. The Trump Presidency complicated matters in this regard. During the Trump period, India and the US actively discussed the prospects of a bilateral FTA. The discussions, though, were hit by regular disruptions. These ranged from the US withdrawal of the preferential GSP status to Indian exports in the US market, the unilateral hike in tariffs on steel and aluminium imports into the US;,temporary suspension of H1-B visas and regulatory restrictions cramping the scope of H1-B visas, particularly spouses of their holders, creating great uncertainties for Indian professional migrants to the US.
The Trump administration’s overall attitude towards trade also caused friction between the two countries. Trump’s cynicism of the multilateral rules-based trade framework of the WTO, particularly his refusal to appoint judges to the appellate tribunal for resolving disputes, found India and other major economies at a loss to remove the logjam. Further Trump’s repeated allusion to large developing countries having benefitted heavily from the concessions they get from the WTO, and his pushing emerging market economies out of the scope of non-reciprocal market access preferences, didn’t go down well with India.
India, did, however, stay engaged with the US on a bilateral trade deal. That the deal eventually couldn’t be pulled off has much to do with the insufficiency of trust and comfort between negotiators. India’s trade pessimism, as reflected in its pull-back from a mega-FTA like the RCEP, symbolised its own hesitation over entering into bilateral FTAs and the unhappy compromises they entail. On the other hand, the Trump administration’s overwhelming tendency to ruthlessly extract market access from bilateral FTAs, for political messaging aimed at domestic constituencies, limited flexibilities on both sides.
The Biden administration has taken a more accommodating attitude towards trade. It is back at the WTO with a purpose. While retaining the emphasis on ‘America First’, it is talking to major trade partners in a more purposeful manner. Unlike its predecessor, which failed to balance robust strategic engagement with allies like India with equally meaningful advances on trade, the Biden administration is more sure of its expectations on trade from its allies. This explains why the stress on worker-friendly trade policy notwithstanding, the Joint Statement issued on the occasion of the USTR’s visit documents specific details on bilateral trade concerns.
In a sense, it might have become easier for the US and India to talk trade over the last one year. Strategic realignments after Covid-19, particularly the economic rise of the Quad and Indo-Pacific, including efforts to safeguard strategic supply chains, have made both countries reflect closely on many issues connected to bilateral trade. Both realise the importance of ironing out creases that are holding back more trade if they need to contribute to an economic framework for the Indo-Pacific—a goal announced by the US secretary of commerce Gina Raimondo during her visit to Asia last week, along with the USTR.
Greater engagement between business and government stakeholders of both countries in recent months, along with the urgency to focus on critical areas of mutual concern: clean energy and technology, infrastructure and connectivity, vaccines and healthcare products, have created an enabling and trustworthy environment for discussing bilateral trade. It is hardly surprising therefore that mangoes and cherries from India and the US should be able to cross borders with ease soon. There is also much promise in the areas marked for future work: digital trade, healthcare, environment, standards and conformity assessment. The attention on working on the basics such as bilateral disputes at the WTO, implementation of the global Trade Facilitation Agreement (TFA) and an effective visa regime for professionals, signals eagerness of both countries to correct fundamentals issues affecting bilateral trade.
It is also interesting to note that both countries avoided mentioning a bilateral FTA during the USTR’s visit. The emphasis, instead, was on building ‘an ambitious vision for the future of the trade relationship’ by energising mechanisms like the bilateral Trade Policy Forum (TPF). Avoiding mention of an FTA reflects policy maturity and pragmatism on both sides. Both countries understand that as large countries with numerous vocal minority lobbies, reaching a comprehensive FTA will be hugely challenging. It makes more sense to devote energy on creating the foundation for a trade deal rather than harping on it.
The author is Senior research fellow and research lead (trade and economics), Institute of South Asian Studies, NUS
Views are personal