Live Mint, May 07, 2018
By Pradeep S Mehta and Bipul Chatterjee
If we have to progress, we need markets for our goods and services and access to big markets. Therefore, our policymakers have inter alia agreed on the Indo-US “strategic partnership” to enhance bilateral trade from the present volume of $120 billion a year to $500 billion. This can be done if both explore comprehensive cooperation in areas such as defence and energy.
While Indo-US trade relations have shown some good progress in recent years, they are still bogged down in a quagmire of issues on which there are fundamental divergences of opinion. Two major issues are related to the application of standards and intellectual property rights. As against counter-narratives, they require the development of joint narratives. That will happen if, and only if, both parties can overcome their biases and see the bigger picture when it comes to the role that enhanced trade can play in fostering security, particularly in the Indo-Pacific region.
Time to discuss a road map
For several months, the US has been sending signals that it is keen to explore a comprehensive free trade agreement (FTA) with India. This is in line with the current US administration’s position on trade—as against multilateral or regional deals, it is more comfortable with bilateral agreements.
India is yet to react to such calls. It appears that India Inc. is not interested in such a deal, as it is happy with the market access it is already getting in the US, while continuing with its defensive stand towards FTAs. As a result, our Union commerce ministry is hamstrung in moving forward and the external affairs ministry is yet to properly appreciate the role of trade agreements in furthering our foreign policy goals.
This is not to say that India and the US should immediately launch negotiations for a comprehensive FTA. What is needed is regular structured dialogue on contentious non-tariff issues bogging bilateral trade relations, which can then result in a road map for such an agreement.
This is what came out clearly from a round of deliberations in Washington last month when CUTS launched its sixth overseas centre there. Witnessing an overwhelming response from the relevant stakeholders on both sides, senior officials and industry representatives were unanimous in their conclusion that there is no alternative to regular dialogue and joint studies on specific issues such as standards, intellectual property rights, and customs cooperation, to narrow differences.
Why defence and energy?
It is no secret that the industry-military complex is a major backbone of the US economy and that India is a major market for defence products. India is also keen to diversify the sources of its defence products. Therefore, the decisions by major American defence firms such as Lockheed-Martin to expand their production centres in India is a welcome development. They need clear signals from our government to move fast. Future development of the industry-military complex will not just help India enhance its security, but also assist in our big challenge of large-scale job creation. As defence production is technology as well as component-oriented, this will also help Indian companies get into higher stages of global value chains.
For this to happen, India will have to improve its public procurement as well as intellectual property rights regimes. Many American companies are reluctant to enter the Indian market because they are not sure of getting fair deals while bidding for government contracts. Nor are they sure about the protection that their technologies need in order to remain competitive in a particular sector.
Similarly, energy is another sector where the scope for cooperation is huge. Here again, a positive sign is that the first consignment of American oil has been received in India. More oil imports from the US are expected as India is keen to reduce its dependence on oil from the Middle East.
Also, there is huge scope for trade and technology transfer in areas such as coal, renewable energy and natural gas. Given India’s commitment to clean energy and greater access to energy for its population—manifested in its leadership of the International Solar Alliance—there is no doubt that it requires enhanced cooperation with countries like the US to get modern technologies and state-of-the-art equipment.
In short, taken together, trade and technology transfer in defence and energy production can leapfrog Indo-US trade volumes from their current state of business-as-usual growth to a much higher level within a reasonable period of time so that the stated objective of $500 billion bilateral trade is achieved.
Other areas of cooperation
While defence and energy cooperation should be the two major pillars on which the future story of Indo-US trade relations should stand, India should continue its push for greater market access in the US for its agricultural products and services. There is no doubt that the American economy in general, and American consumers in particular, are benefitting from such Indian products and services, but more can be done for the benefit of citizens of both countries.
Pradeep S. Mehta is secretary general of CUTS International.
Bipul Chatterjee, executive director at CUTS International, contributed to the article.