India-US free trade agreement key to ending dispute, says advocacy group

A free trade agreement between India and the US is a key to resolving their trade disputes as it will cover biggest irritants in ties including tariffs and mobility of Indian professionals, a top American business advocacy group has said.

Observing that the relationship between India and the US in the last five years has progressed tremendously, the advocacy group said the interest of the two largest democracies of the world are much more aligned than ever.

"The challenge which we have is that we need to work out a trade deal. And when you look forward next five years, I believe India should sign an FTA with the US. Once you have FTA, all this issue of tariffs will go away," Mukesh Aghi, president and CEO of the US-India Strategic Partnership Forum (USISPF), told PTI.

An India-US FTA, he observed, would be able to address the Indian concerns over import of Chinese goods.

"Because we are concerned about Chinese goods coming to India, that under WTO guidelines, everything with the FTA, India can put as much tariff, it has no impact on US tariffs itself, he said.

"The FTA once signed should have what I call mobility on H-1B. You give FTA partner more exception," he said adding that going forward the two countries need to be creative and bold and drive this relationship on a path where there's much more better understanding on the trade side.

The H-1B visa programme, popular among Indian technology professionals, allows foreign workers to obtain temporary authorisation to work and stay in the US.

While there has not been much talks between the two countries on this issue, Aghi said he believes that FTA is key to resolving the trade disputes.

"Within the FTA, you can have BIT (bilateral investment treaty) also. It covers a lot of stuff. It takes the biggest irritants in the relationship out, he said.

"It provides mobility to Indian professionals who could come into US and work. It provides almost zero tariff for US goods coming into India. I think this has to be a bold move on part of the new government whoever comes in," Aghi said.

With India into an election mode, where the government of the day cannot take any major policy decision due to the enforcement of the model code of conduct, Aghi said this would be the recommendation of the USISPF to the new government to "be bold about it, start discussion FTA with the US because for this president (Donald Trump) trade is the biggest thing."

If the two countries are able to quickly put an FTA together, where it has impact on mobility of professionals, it's a win-win situation, he asserted.

When asked if the two countries are on a collision course on trade and tariff issues, Aghi said, "There is a danger, that the tail is going to start wagging the dog itself and we got to avoid that."

"I also sincerely believed that there's enough maturity, we'll find a way to solve this issue out, because at this stage India cannot afford to get into a trade collision with the US neither can US. So, we have to find ways to short out these issues," Aghi said.

Observing that tariff is one aspect of the trade dispute.

Trump has repeatedly claimed that India is a "tariff king" and imposes "tremendously high" tariffs on American products.

Steel tariff, Generalized System of Preferences (GSP) are issues, he said,

On March 5, the US decided to withdraw import duty benefits, which was in the range of 1-6 per cent, under its GSP programme.

"I think, the e-commerce policy, the way it was handled is an issue. Data localization is a challenge. We need to look at overall, a process which protects both countries' interest and find a common ground to have a win win value proposition, he said.

Responding to a question, Aghi said some of the policies coming from India in recent past are protectionist in nature.

"It has to do either the election now or others. It doesn't help. For example, medical devices. Yes, we put two price cap on them, but at the end, the consumer still paying the same, he said, adding that it still has not been solved.

"As we move forward next five years whoever comes in, should focus on a driving an FTA, which should take a lot of this irritants out in the relationship, said the USISPF head.

He refuted the impression in some quarters in India that that Indian policy is in reaction to protectionist measures from the US.

While India has made lots of efforts in last five years, it has moved slightly towards being more protectionist, Aghi said.