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India-USA trade deal

India-USA trade deal

Tag:GS 2|| International Relations|| India & Rest of the World|| USA

Why in news?

  • India and the US failed to reach a limited trade agreement during the visit of the Indian PM to the U.S.

What is the expected “limited” trade deal?

  • Duties imposed by India
    • The trade agreement lagged behind India’s duties on Information and communication technology (ICT) goods.
    • The U.S. wanted to reduce or remove the 20% penalty on mobile phones and Ethernet switches.
  • Greater access to the market: The U.S. has called for greater access to the Indian market for medical devices, such as stents and knee implants, other than dairy and agricultural products.
  • GSP: India, for its part, wanted to restore the Generalized System of Preferences, which provides preferential market access to its goods in the United States.

 Why the trade deal couldn’t be finalized?

India

  • Sensitive products
    • S. specifications for medical devices and dairy and agricultural goods are seen as politically sensitive items for India.
    • As the government has often taken credit for making such items affordable.
    • Losing price controls at present is not a choice for India, as it would push up prices for these goods in the state.
  • Issues on IP, e-commerce, HIB visas
    • A full-scale trade agreement will present major challenges to problems such as intellectual property, e-commerce, and H1B visas.
  • Economic slowdown
    • With its economy in the grip of a big recession, any concessions from India on imports of American products may not have gone well, both politically and economically.

U.S.

  • Elections
    • For U.S. President Trump, even a small deal with India will be something to think about as the election year progresses.
  • US-China trade talks
    • The trade talks with China are going nowhere.
    • China has not only introduced punitive tariffs on the part of the US but has also retaliated by choosing goods that could damage Trump’s electoral district and supporters.
  • It explains the hectic, behind-the-scenes operation with India over the last few weeks.
  • Despite little information in the public domain, it seems that India has been strong and has refused to give in to U.S. demands.

Way ahead

  • Trade negotiations are never quick, and for them to succeed, both sides should believe in a policy of giving and taking action.
  • It does not help when one side is trying to bulldoze the other to fully yield to its interests.
  • At this point in time, even a limited trade agreement between India and the U.S. seems to be some distance away.

Additional information

  • Generalized Scheme of Preferences (GSP) 
  • The Generalized Scheme of Preferences (GSP) is a U.S. trade policy designed to foster economic growth in the developing world by offering preferential duty fee entry to up to 4,800 goods from 129 identified recipient countries and territories.
  • Objective of GSP
    • The goal of the GSP was to support the development of poor countries by promoting exports from them to developed countries.
    • The GSP supports sustainable development in recipient countries by allowing those countries to improve and diversify their trade with the United States.
    • GSP provides opportunities for many of the poorest countries in the world to use trade to develop their economies and alleviate poverty.
  • Benefits of GSP
    • Indian exporters profit indirectly–through the gain to the importer of reduced tariffs or duty-free entry of qualifying Indian goods.
    • Reduction or elimination of import duty on an Indian commodity makes it more profitable for the importer–other items (e.g. quality) are equivalent.
    • This tariff choice helps new exporters to enter the market and existing exporters to increase their market share and boost profit margins in the donor country.
  • H-IB visa
    • The U.S. H-1B visa is a non-immigrant visa that requires U.S. companies to recruit graduate-level employees in specialized occupations. Specialized professions include theoretical and technical expertise in specialized fields such as IT, banking, accounting, architecture, engineering, mathematics, research, medicine, etc.
    • Any professional level work that usually requires a bachelor’s degree or higher may be subject to an H-1B specialty occupation visa.
    • H-1B visa holders in the US face difficulties in switching jobs, even if the new job is similar to the old one and needs the same exact skill sets.
    • The U.S. Citizenship and Immigration Services (USCIS) rejected a number of applications by the new employer, citing that the new position does not constitute a’ specialty occupation.

 References