India-US Dialogue: Focus on GSP, Trade Barriers, and IPEF
Introduction
The upcoming ministerial-level India-US talks in Washington, co-chaired by Commerce Minister Piyush Goyal and US counterpart Gina Raimondo, are expected to focus on the Generalized System of Preferences (GSP), trade barriers, and engagements under the Indo-Pacific Economic Framework for Prosperity (IPEF). These discussions are vital as both nations seek to strengthen their economic ties and address key trade issues.
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GSP Restoration: Indian Exporters' Key Demand
The US withdrew GSP benefits for India in 2019, impacting Indian exporters, who are now pushing for their restoration. These benefits allowed duty-free access to the US market, boosting sectors like textiles and pharmaceuticals. Although the GSP reinstatement is a top priority for Indian exporters, the upcoming US elections may delay immediate progress.
Tackling Trade Barriers: A Persistent Issue
Trade barriers remain a challenge for US companies in India, with the US highlighting 15 pages of trade obstacles in its 2024 National Trade Estimate Report. India's high tariffs and regulatory restrictions have contributed to a growing US trade deficit with India, particularly in merchandise. This imbalance is likely to be a major focus during the talks, with the US expected to push for reduced tariffs and easier market access.
Indo-Pacific Economic Framework (IPEF): Enhancing Regional Cooperation
IPEF, led by the US, aims to strengthen economic cooperation across the Indo-Pacific region. India has signed agreements under the clean economy and fair economy pillars, while its participation in supply chain resilience discussions is expected to be crucial. The framework is built around four pillars: trade, supply chains, clean economy, and fair economy, aligning well with India’s interests in regional economic security.
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India’s Strategic Role in the IP
Bilateral Trade: Mixed Growth
India's merchandise exports to the US surged by 54.4%, from $54.3 billion in 2018 to $83.8 billion in 2023, while services exports grew 25.6%. US exports to India saw a more moderate increase, with merchandise exports rising by 20.8% to $40.1 billion, and services growing by 18.7%. This imbalance in trade highlights a key point for discussion, as the US seeks to address its trade deficit with India.
Totalization Agreement: Relief for Indian Professionals
Negotiations for a totalization agreement to exempt Indian short-term visa holders from paying social security contributions in the US will also be on the table. This agreement could bring financial relief to Indian professionals working temporarily in the US, a significant issue for the IT and services sectors.
Conclusion: Charting the Future of India-US Trade
The upcoming dialogue is critical for resolving long-standing trade issues and boosting economic cooperation. While the restoration of GSP and reduction of trade barriers are key priorities, political factors in the US may affect the speed of progress. Both countries need to find common ground to fully realize the potential of their trade partnership.
Also Read: India and IPEF Partners Discuss Rollout of Clean and Fair Economy Pact