The Print | 5 November 2021
US, India are set for tough talks as US Trade Representative Tai comes calling this month
by Nayanima Basu
New Delhi : India and the US are set to talk tough on bilateral trade and investments as they get ready to resume the Trade Policy Forum (TPF) after a gap of four years with the maiden visit of US Trade Representative (USTR) Katherine Tai later this month.
Tai, who was confirmed by the Joe Biden administration as the USTR in February 2021, is the first woman of colour to assume this role.
Tai will be in Delhi from 22-24 November as part of a two-week visit to Japan, South Korea and India that aims to “strengthen (the US’) trade and economic relationships with key allies and partners”.
In India, she will be meeting her Indian counterpart Piyush Goyal, the Union Commerce and Industry Minister, for the TPF. She will be accompanied by Deputy USTR Sarah Bianchi.
The India-US TPF was established in 2005 with the Office of the USTR and the Ministry of Commerce and Industry in India serving as nodal agencies.
The TPF last met in October 2017 in Washington DC under the then commerce minister Suresh Prabhu and former USTR Robert Lighthizer. Former President Trump subsequently discontinued it as he sought a comprehensive trade deal with India.
However, after PM Narendra Modi’s meeting with US President Biden this September, a joint statement said the leaders “looked forward to reconvening the India-US Trade Policy Forum before the end of 2021, to enhance the bilateral trade relationship by addressing trade concerns, identifying specific areas for increased engagement and developing an ambitious, shared vision for the future of the trade relationship”.
The Biden administration has made it clear to India that it is not keen on a bilateral trade agreement, unlike the previous Donald Trump government, and Washington is now more focused on easing some of the persistent trade irritants between both countries, sources told ThePrint.
The sources said the US will most significantly raise the issue of restrictive data policies and discriminatory tax measures, which Tai had flagged in her first National Trade Estimate Report (2021) this March. The US is also likely to raise the issue of non-tariff barriers and import restrictions on a range of items.
India, the sources added, will once again push the US for negotiating a smaller trade pact or a mini trade deal — something that was almost concluded under Trump.
Concerns on both sides
Earlier this year, after Tai’s first conversation with Goyal as USTR, Washington made it clear that the road ahead is going to be challenging between both countries, irrespective of the strategic gains both sides have made.
The USTR proposed retaliatory action against India’s 2 per cent equalisation levy (EL) and also initiated an investigation against the country’s Digital Services Tax (DST), which the US described as discriminatory.
Under DST, also known as the EL, the government charges 2 per cent tax on revenue generated from a broad range of digital services offered in India. The DST is meant only for non-resident companies.
In March, the US proposed retaliatory tariffs of up to 25 per cent on nearly 40 Indian products, from shrimps to silver, as a counter against the EL. The tariffs were announced in June but suspended pending international tax negotiations.
The sources said both sides have been discussing the matter regularly, and Goyal and Tai have been in touch with each other on finding a resolution to the matter.
On 3 November, Tai and Goyal spoke to each other virtually and discussed her upcoming visit.
According to a statement issued by the USTR, they “looked forward to their upcoming meetings in New Delhi (22-23 November), and agreed to take a comprehensive look at ways to expand the bilateral trade relationship and ensure the future success of the US-India Trade Policy Forum”.
Speaking to ThePrint, Richard M. Rossow, Wadhwani Chair in US-India Policy Studies at the Washington-based Center for Strategic and International Studies, said “the US has a pretty wide-ranging set of trade concerns to raise”.
“The priority issues are those that comprised the mini deal our nations almost sealed last year — such as price controls on medical devices, agriculture market access. USTR is hoping India relents on its equalisation levy for cross-border digital services. It has delayed implementation of retaliatory tariffs, but such a delay will not last forever.”
“A much wider set of issues remains in front of mind. This includes the wide range of tariff increases and local content mandates India has introduced in recent years ; concerns about data localisation through the Personal Data Protection Bill ; and intellectual property rights,” he added.
Most American officials, Rossow said, “believe India must show good faith by dismantling recent trade barriers before a larger trade agreement can be considered”.
“Pushing a wider trade agreement with India will take a great deal of senior-level time and energy. With so many competing interests, American officials will want real proof that India is ready to make serious trade commitments,” he added.
Welcoming the move to “restart” the TPF, Mukesh Aghi, president and CEO of the Washington-based US-India Strategic Partnership Forum (USISPF), said, “We hope for fruitful discussions that could potentially bring about an early harvest deal. A vibrant Indian economy provides tremendous opportunities for US corporate investment, benefitting both economies.
“Enhanced trade would greatly strengthen the strategic partnership between New Delhi and Washington, taking this already robust partnership to new heights.”
India is also expected to make a last-ditch attempt at having the US restore the Generalised System of Preferences (GSP) programme, which was taken away under Trump in June 2019. The Biden administration has made no mention of reinstating India’s status in the programme. India enjoyed trade benefits to the tune of about $6 billion under the GSP programme.
“India would like to see a restoration of trade benefits under the GSP. However, the entire GSP programme expired in January and has not yet been re-authorised. So, USTR cannot make any binding promises at this point,” Rossow said.
Mark Linscott, nonresident senior fellow at the Washington-based Atlantic Council’s South Asia Center, said a “challenge both sides confront in removing some of these irritants is that the Biden administration has its hands tied on GSP”.
“The US GSP programme has expired and its renewal is stuck in the Congress. That said, if this TPF produces little more than pledges of future dialogue, it will be a bit of a dud. The moment has come for both sides to prioritise the trade relationship, put it on par with their work with other countries.”
Linscott, who is a former assistant USTR for South and Central Asian Affairs, added, “If the US can spend so much time with European allies, even with no FTA (free trade agreement) on the horizon, it should be able to devote that kind of attention to India.
“Of course, the perennial problem is a perspective that it is too difficult to negotiate on trade with India and there is a history of failed efforts in the past to solve problems that might justify this perspective.”
(Edited by Sunanda Ranjan)