American fashion brands push for India-US FTA to streamline trade issues

After repeated overtures from Trump administration, India has told the US that it was unwilling to discuss a full FTA

Major American apparel brands such as Ralph Lauren, Calvin Klein, Van Heusen, and Carters have made a case for a free trade agreement (FTA) between India and the US, arguing it will attract investments and streamline trade-related issues.

“An FTA with the US is a major component of bilateral business relations that is missing now,” Tara Joseph, president of the American Chamber of Commerce (AmCham) in Hong Kong, said. 

AmCham Hong Kong, in partnership with the Confederation of Indian Industry (CII), has brought a delegation of 15 top US apparel companies to India for exploring mega investment opportunities. It has also asked the government to reduce the customs duty on synthetic fabric imports.

The American industry body is the latest to bat for an FTA with the US. Earlier this year, both the US-India Business Council and the US-India Strategic Partnership Forum -- major business advocacy groups -- reiterated their support for a bilateral trade deal.

This view has found support among Indian industry as well. “We need FTAs with major buying countries like the US. In the current business environment, for a variety of reasons, this may be a good time to sign a bilateral FTA with the US," said Gautam Nair, chairman of the CII Textiles Task Force on Sourcing and Investments.

According to AmCham, the US-China trade war has made sourcing from China costly and has opened a window for investments into India, and that businesses are keen to test whether manufacturing can start. 

During the ongoing three-day visit, the companies are testing the Indian market and having talks with Indian firms for greater sourcing operations, as well as the government, for investments of “hundreds of millions of dollars”, Joseph said.

In a meeting with Textiles Minister Smriti Irani, the delegation suggested that problems in doing business and lack of skilled manpower remained key issues. It also flagged the long time taken in moving goods into production areas. 

“India has a lot of cotton and natural fibres, but many US manufacturers work with synthetic fibres and the high cost of bringing them in creates a difficulty for manufacturers," Joseph said. The delegation has also discussed sustainable manufacturing practices with a focus on low water consumption, with government functionaries, including NITI Aayog CEO Amitabh Kant. 

FTA debate

After repeated overtures from the Donald Trump administration, India has told the US that it was unwilling to discuss a full FTA. Officials and trade experts say it is against India's interest to sign an FTA with the US, given that import tariffs for the majority of goods are relatively high in India and the country would need to adjust to a much greater degree to lower duties to US levels, which are among the lowest globally.

Instead, New Delhi has pushed for a 'trade package' that will aim to provide mutual trade concessions across information and communication technology (ICT) goods, aviation, and oil purchases. The package has been in the works for the past year and a half, with trade officials having met as many as seven times to hammer out a deal that provides an amicable solution to grouses from both sides. 

As part of the deal, India had considered dismantling its existing price cap regime for coronary stents with a trade margin policy. It had also discussed the possibility of allowing lower duties on import of certain ICT goods such as high-end mobile phones and smartwatches from the US.