Enhancing India-US Trade Relationship

By siliconindia   |   Thursday, 23 February 2023, 19:30 IST
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Enhancing India-US Trade Relationship

With supply chains and clean energy emerging as a crucial focus for both India and the US, the former will likely be reinstated in the GSP program to enhance the ties between the nations.              

The Reagan-Thatcher revolution and the emergence of the Washington Consensus, which emerged in the 1980s, have critically led to opposition in economic orthodoxy over policies to imply winners in the arena, rather than mere market decisions. Following this, the United States has passed two crucial legislations- the chip and Sciences Act, and the Inflation Reduction Act in reshaping the pre-existing global supply chains, with an anticipated budget of 280 billion USD and 370 billion USD.

The former act aims at building the domestic semiconductor industry for assured scientific supremacy in the US, with the latter reducing healthcare costs to encourage clean and green energy transmission on an effective note. The attempts highly aim at decoupling the US economy from the clutches of political uncertainties, where India has considerably joined the path via distinct schemes like Production Linked Incentives (PCI). As a result, India is all set to embrace opportunities in emerging supply chains.

An integrated synergy between the US and India on the front is likely witnessed in recent times, with a major increase in the number of state visits by senior leaders of the respective nations. However, trade relationship ties between India and the US are yet to be strengthened per the post-liberalization period, thereby attaining a full-fledged agreement. That is, both the democratic nations hold distinct views on agriculture, labor standards, climate, and human rights issues, and are reflected accordingly in the current Indo-Pacific Economic Framework for Prosperity (IPEF). The IPEF highly aims at building regional cooperation on trade, supply chain, clean energy, and tax and anti-corruption.

Supply chains and clean energy are generally critical arenas in both India and the United States, where green hydrogen holds an indispensable role play in building resilient global value chains. Wherein, India is yet to extend their participation in the trade channel of the framework, underlining the need for an established alliance between the two democratic nations. That is, reinstating India in the Generalised System of Preferences (GSP), and crucial negotiation on services trade exclusive of the framework, in addition to an intellectual-level exchange of ideas on labor and environmental standards guides the nations in extending their cooperation over the framework.

Established by the US in enabling preferential treatment to imports from developing countries, the GSP aims at exempting tariffs for eligible products from developing nations on their import to the United States. Thus, Indian exports to the US have emerged to be more competitive, accelerating the trade scale and pace between the nations. India has benefitted exponentially by adapting to the GSP system while ensuring critical harmony between the countries. Thus, the US space is critically aiming to reinstate India into the GSP program, enhancing the bilateral ties between the areas on an efficient note.