Trade relations between India and US came under pressure in June 2019 when the US announced the withdrawal of zero duty benefits to Indian exports worth $6 billion and India responded with retaliatory tariffs on 29 US products.
India’s retaliation was also in response to unilateral action the US had taken in March 2018 when it imposed a global additional tariff of 25% and 10% on imports of steel and aluminium products respectively. Though these additional duties were mainly aimed at China, they also affected exports from India to the US.
However, both the countries are continuing to talk to arrive at a limited trade agreement – that would be confined to a few sectors or products. The agreement is expected to cover, on one side, restoration of duty-free benefits for Indian exports and, on the other side, tariff-related concessions for US farm products, pricing of pharmaceutical products, and information and communication technology products.
A lot of hope was built around signing of a new trade agreement during the visit of the Prime Minister Modi’s visit to the US. Commerce Minister Goyal was sent in advance of the PM’s visit to try to conclude the agreement. While there is yet no agreement, both countries are expressing confidence that they will be able to come to arrive at a resolution, through continuing negotiations. The latest meeting was held in early October between the Indian Minister of Commerce and Industry and the US Secretary of Commerce; it is expected that the US Trade Representative will make a visit to India soon, to follow up on this.
India is demanding resumption of export benefits to certain domestic products under the US Generalised System of Preferences (GSP) and exemption from high duties imposed by the US on certain steel and aluminium products. GSP is a trade arrangement under which the US provides duty-free imports to some countries. India is also asking for greater access to US market for its products from sectors such as agriculture, automobile, auto components and engineering.
In return, the US wants India to make major concessions in a number of areas. US wants India to remove price controls on medical devices, particularly heart stents and knee implants, cut import duty on Harley Davidson bikes and give larger market access to American agricultural commodities and dairy products. Specifically, it wants India to make a commitment to revisit current price controls on medical devices within a timeframe, if not an immediate release of these caps. The US also wants India to scrap 20% tariffs that exist on information and communication technology (ICT) goods.
The US has also raised concerns over the high trade deficit with India. In 2018-19, India’s exports to the US were $52.4 billion while imports were $35.5 billion.
Another major issue raised by the US is about e-commerce policy of India. In February 2019, India brought in new investment rules for the e-commerce sector. The US has argued that India’s policy is hurting its companies like Amazon and Walmart, which are among the biggest ecommerce retail monopolies. Amazon occupies around 50% of the US ecommerce market, earning more than US $ 150 billion worldwide and it is expanding across sectors in India. Walmart is another giant whose revenue worldwide is more than US $500 billion; it has recently acquired Flipkart, an Indian ecommerce company. India is justifying its policy in the name of protecting its small retailers. Actually, it is a fight between Indian and foreign retail monopolies as the largest Indian retail monopoly, Reliance has announced its plans to enter the e-commerce sector and compete with the American monopolies.
The American bourgeoisie is also opposing India’s policy of data localization. In April 2018, the Reserve Bank of India enacted laws requiring foreign payment companies to store all of their transaction-related information involving Indian customers exclusively on servers located within the country. Realizing the value of such data, the Indian bourgeoisie wants Indian data to stay within the country. While negotiations on the issue have been going on between the US and Indian authorities, data localization continues to remain a crucial irritant in the US India economic relations.
The issue of data ownership and its location is in reality also a fight between the American and Indian bourgeoisies. Speaking at the Vibrant Gujarat Summit in January 2019, Mukesh Ambani asked PM Modi to take steps to end increasing “data colonisation” by global corporations, saying Indians should own and control their own data. “Data is the new oil (in the new world order). And data is the new wealth,” he added and continued to say, “Today, we have to collectively launch a new movement against data colonisation. For India to succeed in this data-driven revolution, we will have to migrate the control and ownership of Indian data back to India – in other words, Indian wealth back to every Indian.” On the other hand American multinationals, Google, Facebook, Twitter, Apple, etc. want to retain their global monopoly over data.
Another point of tension between the two countries has been the tighter work visa rules by the US which can potentially drastically reduce the number of Indian tech workers which are the main beneficiaries of the H-1B visas. This has already forced Indian IT companies to hire more American professionals for the projects in the US and incur higher cost.
The trade negotiations between India and US are taking place in the background of a growing military strategic alliance between the US and India. The US looks at India with its strategic location in Asia, its huge population and its massive armed forces as an important ally in its plan to encircle China and establish its domination over the India Pacific region. The Indian big bourgeoisie thinks that with US imperialist support, it can challenge China and establish itself as a major imperialist power in this region. The Indian bourgeoisie is bargaining for greater access to the US market, and offering to buy more weapons and oil from the US in return. For these reasons, both the US imperialist bourgeoisie and the Indian bourgeoisie are trying to ensure that trade disputes between them are not allowed to come in the way of the strategic relationship. This strategic alliance is totally against the interests of the Indian people and peace in the region.