With India-U.S. Trade deal done, it’s time for India to reorient its global economic engagement
India’s largest trading partner, and with whom it has a large trade surplus, the United States, is no longer keen to enter into a bilateral free trade agreement (FTA), according to administration Joe Biden’s indications. Official acknowledgment of this, from Trade Minister Piyush Goyal, suggests that years of negotiations for a “mini-trade deal” followed by a full-fledged trade pact that Mr Biden’s predecessor oversaw may well be unsuccessful now. The government will now seek to work on market access issues from both sides, he said, adding that lowering non-tariff barriers, mutual recognition pacts and adopting common quality standards can also help Indian exports in the meantime. It is possible that even these issues, which include lingering dissonances over access to U.S. agricultural products or the easing of import duties on automobiles and Bourbons, should be discussed again. The US envoy to India met with Goyal on Friday for what he called talks on realizing the US president’s $ 500 billion bilateral trade vision. The trade target, set when Mr. Biden was vice president of Barack Obama’s regime, remains unchanged, but the tools to achieve it are no longer clear. India was removed from the United States’ Generalized System of Preferences (GSP) which granted tariff relief to its exports by the Trump administration in 2019, and hopes of its reintroduction through a mini-trade deal. now appear dark. While India was expected to profit from the Sino-US trade wars under Donald Trump’s administration, its retaliation for revocation of GSP status with increased tariffs on US products has resulted in friction that may have hampered a mini-trade deal before the change. at the helm of the White House.
The US lawless stance on the FTA implies that ambitions may need to be curtailed, but also offers India the opportunity to holistically review its stance on world trade. It is refreshing that Mr Goyal signaled a rethought approach to FTAs and reminded Indian industry that there cannot be one-way traffic. This must be accompanied by actions that begin to untie the creeping walls of India’s import tariffs. The Atmanirbhar Bharat campaign has further exacerbated this view – such as the advent of a protectionist “closed market” project. The strong exhortations that the self-reliance effort is one that seeks to integrate into global value chains cannot go further. Trade policy cannot be perpetuated in isolation and, in fact, also affects investment. After leaving the RCEP, India must demonstrate to its potential FTA partners, including the EU and the UK, with whom rivals like Vietnam have already struck a deal, that it is of a viable alternative to China in a post-COVID world. To be a great trading and manufacturing nation, India cannot afford to continue sending mixed signals.