Terms of engagement

India-US economic partnership needs more energy

Union Commerce Minister Piyush Goyal last week met his US counterpart, Commerce Secretary Gina Raimondo, as part of the relaunched India-US Commercial Dialogue. The fact that regular discussions are back on the agenda can be considered a positive sign. The two ministers agreed to a mid-year review of outstanding issues by their senior officials prior to their next summit, which is expected to return to being an annual affair. There were specific areas where co-operation was highlighted. These included supply-chain resilience in the context of decoupling from China-centred production networks.
 

The recent announcement of a US-India initiative on Critical and Emerging Technology (iCET) was lauded in the joint statement; the iCET is meant to strengthen links among the innovation hubs in future-focused sectors in both countries. Of course, the existence of people-to-people contacts and strong investment links in these sectors means that there is already a strong partnership. The question is whether the iCET can be leveraged into ensuring greater regulatory harmonisation in such a way that both countries benefit from integrating their hi-tech sectors. However, existing problems including tax policy in India and end-use and other restrictions in the US were not on the agenda at the commercial dialogue. Other focus areas included the green and digital economies, though apart from expressing support for some existing initiatives to expand contact between the sectors, not much was on offer.
 

Behind the bonhomie, clearly, major outstanding issues remain. The central problem is that, as compared to about 10 years ago, the attitudes in both countries on trade have reversed. The Indian government, which has spent some time being sceptical of the benefits of free-trade agreements, has now signed several with developed economies and is engaging on others, especially with its largest overall trading partner, the European Union. In the meantime, the US, once the bulwark of trade integration, has essentially closed itself off from further trade negotiations and continues to hold the World Trade Organization and the multilateral system hostage. The current US President, Joe Biden, is not much more positive on trade than his predecessor. His signature global economic initiative, the Indo-Pacific Economic Framework, or IPEF, was no doubt discussed in the commercial dialogue —but India is not part of the pillar of the IPEF that discusses trade, and the IPEF itself has no real economic proposition at its heart.

The US’ big incentive for its partners in the region, including India, is market access, and that remains off the table. Meanwhile, US companies are not as interested in the specific sectors — whether job-intensive, industrial, or infrastructure-related — that are of most interest to the Indian side. As a consequence, it is hardly surprising that commercial dialogues with partners like the European Union, Japan, or even the United Kingdom demonstrate more energy than those with the US. Nevertheless, the strategic need to keep engagement with the US going on multiple levels is undeniable. Nor can the existing role played by US finance and American corporations in the Indian economy be denied. The absence of regular contact between the highest officials would allow irritants in the economic relationship to pile up, and that would infect the broader partnership. Regular discussions at policy level will help take economic relations forward.