USTR India Visit: From Mangoes To Pharma Supply Chains To GSP

The recent two-day visit by U.S. Trade Representative Katherine Tai to New Delhi set in the motion the resumption of the Trade Policy Forum (TPF) after four years and set the tone for trade cooperation between India and the United States during the Biden term.

In a joint statement the two countries agreed to work together in developing secure trade and technology supply chains, with a special mention of pharmaceutical manufacturing and health-related products and services. They agreed to resolve concerns surrounding market access for agriculture and food products, tariff reductions and the restoration of India's status under the U.S. Generalized System of Preferences program.

And though the two countries are still far away from making any progress on a free trade agreement, the TPF holds out some hope, trade experts told BloombergQuint.

First, it reopened a formal channel of trade dialogue.

The Indo-U.S. Trade Policy Forum was established in 2005 but went into limbo in 2017 on a variety of disagreements from tariffs to market access. Then U.S. President Donald Trump raised issue with Indian tariffs, describing the country as "king" of tariffs in later years.

With the TPF restored and a joint statement that mentioned much - from mangoes to renewable energy - there is hope for concrete progress.

And while Tai too expressed concerns on high tariffs, regulatory restriction and market access, just as the Trump administration had, the emphasis on supply chain collaboration, across trade and technology, was clear.

“What the meeting now shows in the larger context of the Quad and the strategic partnerships between India and US, is that the U.S. is diversifying their production structure as they don’t want to rely on China as the centrality of their production structure,” states Pravakar Sahoo, professor at the Institute of Economic Growth, told BloombergQuint.

This is turn may help reopen the FTA conversation, say some.

“What’s significantly come out in the joint statement is how many times they’ve mentioned supply chain resilience, health and pharma. While its too early to tell…let’s hope this soon leads up to a Free Trade Agreement and doesn’t remain as just a statement," said Nisha Taneja, professor at ICRIER and researcher on regional trade in South Asia and East Asia.

“The main thing about India’s FTA agreements and trade policy is that we don’t have many with big countries and advanced economies...barring Japan. India has agreements with Japan, South Korea and ASEAN and is negotiating with the EU too, so a deal with the U.S. would be very important from India’s point of view given that U.S. is our largest export market,” Saon Ray, professor at ICRIER told BloombergQuint.

The United States remains the biggest importer of Indian goods and services, amounting to $51.20 billion in 2020, according to U.S. government data. In turn, India imports $27.1 billion worth from the U.S.

Taneja pointed out that the TPF dialogues made no mention of data localisation, a sticky issue for many American finance and internet companies. "FDI too is another area. When we are talking about supply chain resilience and India looking to attract more foreign investors, we need to be discussing about specific sectors of FDI, ” she added.

“We’ve permitted FDI into defense, and U.S. would be a good partner to have to draw FDI from in this sector given their strength," Taneja said.

The post-TPF joint statement states India expressed interest in restoration of its beneficiary status under the U.S. Generalized System of Preferences program.

“With the opportunity of the dialogue, India can take up issues like GSP which the U.S. can accommodate,” Sahoo agreed.

The GSP program includes tariff concessions provided by wealthy nations on exports from developing and least developed countries. India had exported goods worth $6.3 billion to the U.S. under the GSP program in 2018 before the Trump Administration terminated the tariff benefits to India in June 2019.