Upcoming India-US trade meet may not find BIT breakthrough

Discussions on the proposed Bilateral Investment Treaty (BIT) is expected to accelerate at the upcoming India-US Trade Policy Forum (TPF) meet on October 20 but a conclusive agreement will be difficult to reach.

The upcoming TPF, which is the premier bilateral arena, for discussing trade and investment issues between the nations will see the BIT being discussed in detail but a conclusive deal remains in question, a government official said under conditions of anonymity.

With the US going into its Presidential elections in November, both governments are being cautious, he added.

The BIT is expected to eventually replace the existing bilateral investment protection and promotion agreements (BIPPAs) that India has signed with 72 nations. The model draft of which was cleared by the Cabinet in December 2015.

Back in August, Commerce and Industry Minister Nirmala Sitharaman had said after the conclusion of the second round of India-US Strategic and Commercial Dialogue in New Delhi that India will wait for the US to respond over the issue.

At the same time, US Commerce Secretary Penny Pritzker had also signalled that discussions will require some time, arguing that any agreement should include similar standards set by the Trans Pacific Partnership - proposed mega trade pact between the US and 11 other Pacific rim nations.

The model BIT states that India or any other country cannot nationalise or expropriate any asset of a foreign company unless the law is followed, is for the public purpose and fair compensation paid. Public purpose is not defined in any treaty India has signed with other nations. The BIT states that dispute-resolution tribunals, including foreign tribunals, can question 'public purpose' and re-examine a legal issue settled by Indian judicial bodies.

However, other nations have reservations about the BIT allowing foreign companies and related aggrieved parties to seek international arbitration, only if they have exhausted all domestic dispute redressal mechanism or legal options.

India received $17.95 billion in Foreign Direct Investment from the US between April 2000 and March 2016.

Other crucial issues like Visa regulations, customs cooperation, greater market access for goods and intellectual property rights are also set to discussed at the 10th edition of the TPF in New Delhi.

The TPF has five focus groups overseeing Agriculture, Investment, Intellectual property rights, Services, and Tariff, Non-Tariff Barriers. In its annual meeting in July, 2015, India had pressed for setting up a high level group to discuss India's concerns on the Totalization and Social Security Act.

According to India, this law discriminates Indian worker's in the US who ended up losing their social security contributions due to discrepancy in the visa and social security regimes.

India wants early conclusion of the totalisation or Social Security Agreement with the US, aiming to protect the interests of Indian professionals contributing more than $ 1 billion each year to the US social security. Under this pact, professionals of both the countries would be exempted from social security taxes when they go to work for a short period in the other country.

Similarly, the contentious issue of hike in visa fee and cut down in the number of available H1-B and L1 visas proposed by US lawmakers will also be discussed. While India claims it will adversely affect the Indian information technology industry Pritzker had claimed earlier that a majority of such visas were granted to Indians.

"In 2014-15, as much as 69 per cent of the all H1-B visas and 30 per cent of L1 visas were issued to Indians", she had said. Indian companies are an important part of the US economy with Indian foreign direct investment into the US reaching in $11.8 billion in 2015.

On IPR issues, India has consistently maintained its stand that its IPR laws are compliant with global and WTO norms, but the US has raised concerns over the patent regime, particularly in the pharmaceutical sector. On trade secrets, the US wants a separate law.

The current bilateral trade between the countries is more than $100 billion, with merchandise trade at more than $62.11 billion. Both the sides have agreed to take it to $ 500 billion in the coming years.