You are here: Home » Economy & Policy » News
Business Standard

Indo-US trade relations need to be well balanced

India's population has grown by an astonishing 341 million people over the past 20 years to 1.35 billion

Business Standard 

Two years ago, President Trump laid out his vision for a free, open, and prosperous Indo-Pacific Region — one where independent nations grow stronger.

The Indo-Pacific Region is strategically and economically significant. It accounts for two-thirds of all global trade.

These countries are seeking high-quality goods and services to sustain and develop their economies.

companies are extremely well positioned to meet these demands, including in the important area of infrastructure.

The Asian Development Bank estimates that $1.7 trillion needs to be invested in the region’s infrastructure every year.

But, with its strong and growing economy, is key to the Administration’s approach to the Indo-Pacific region.

Last year, India’s real reached an estimated 7.1 per cent growth; and is projected to increase by a very healthy 7.4 percent this year.

India’s has grown by an astonishing 341 million people over the past 20 years to 1.35 billion.

Just the growth since 2000 is greater than the total of the United States.

Combined with the 281 million people in between the ages of 20 and 35, there are almost 600 million people either in — or soon to be entering — their primary years for consuming goods and services.

is already the world’s third largest economy, and by 2030, it will become the world’s largest consumer market because of the rapid growth of the middle class.

Yet, today, India is only the US’s 13th largest export market, due to overly restrictive market access barriers.

Meanwhile, the is India’s largest export market, accounting for something like 20 per cent of the total.

There is a real imbalance!

And it’s an imbalance we must strive to counteract.

Last year, it’s true that bilateral trade between our countries totaled $142 billion, up almost $16 billion from 2017. It’s also true that exports of goods to India increased last year by $7.4 billion, or an impressive 29 percent, to $33 billion.

But the problem is that goods imports from India were also up by more than 7 percent, in fact by by 12 percent, to $54 billion, representing a trade deficit in goods of $21 billion. In the services sector, the United States also had a trade deficit with India last year, of $3 billion. This is especially unusual — we generally have a surplus in services with most countries. But in this case, the deficit is largely due to IT services, for which there is a very strong capability here in India.

President Trump and Prime Minister Modi have jointly committed to further expanding and balancing our commercial relationship.

American companies offer world-class goods and services and the highest standards of quality, safety, and innovation.

They improve the in every country in which they operate. And they are eager to be more engaged here and throughout the Indo-Pacific region. The Indian government is actively pursuing a range of development priorities, including revitalization of urban infrastructure, ensuring access to energy, and digitizing services. We are confident that US technologies and expertise can play an important role in serving India’s critical development needs. Our strict Foreign Corrupt Practices Act also assures the Indian government that our companies will not cause scandals here.

But American companies need to operate in a transparent environment supported by the rule of law, and a level playing field. As President Trump has said, trade relationships should be based, and must be based, on fairness and reciprocity.

But, currently, US businesses face significant market access barriers in India. These include both tariff and non-tariff barriers, as well as multiple practices and regulations that disadvantage foreign companies.

India’s average applied tariff rate of 13.8 per cent, and that remains the highest of any major world The very highest. It has, for example, a 60 per cent tariff on automobiles; it has a 50 per cent on motorcycles; and 150 percent on alcoholic beverages. Its bound tariff rates, namely the highest rate they can charge, on agricultural products average and incredible 113.5 percent, and some are as high as 300 per cent.

These are not justified percentages. They are way too high.

We are working diligently with the Indian government and our private-sector partners to address market access issues through the US-India Commercial Dialogue, and the recently reconvened US-India CEO Forum.

Our goal is to eliminate barriers to US companies, operating here, including data-localization restrictions that actually weaken data security and increase the cost of doing business.

Other obstacles include price controls on medical devices and pharmaceuticals, and restrictive tariffs on electronics and telecommunications products. Tariffs for network routers and switches and parts of cellular phones are as high as 20 per cent. In stark contrast, the US rate for these same products exported from India to the United States is zero — zero versus 20 per cent.

That’s not a justified imbalance.

These high tariffs undermine India’s goal of improving digital access and digital literacy. We applaud India’s commitment to addressing some of these barriers.

In the World Bank’s Ease of Doing Business report, India climbed an impressive 23 spots this year, but it still ranks only 77 out of 190 countries. So there’s lots of room for further improvement. We also look forward to welcoming another large India delegation to our SelectUSA conference from June 10th through 12th in Washington.

Last year, Ambassador Juster led a delegation of 95 Indian business leaders to the Investment Summit. We are hoping and praying he will have a bigger delegation this year.

Edited excerpts from a speech by US Secretary of Commerce Wilbur Ross at the Trade Winds Conference in New Delhi, May 7

First Published: Sat, May 11 2019. 19:52 IST