India-US Dialogue likely to feature talks on GSP, Trade Barriers, and IPEF

The withdrawal of benefits given to India under the Generalized System of Preferences (GSP), trade barriers, investments, and engagements under the Indo-Pacific Economic Framework for Prosperity (IPEF) are some key topics expected to be discussed in the upcoming India-US commercial dialogue and CEOs forum, industry experts said.

Following the previous round of commercial dialogue held in New Delhi in March 2023, the upcoming ministerial-level talks will be held in Washington next week, with commerce minister Piyush Goyal and his US counterpart Gina Raimondo co-chairing the meetings.

Indian industry, especially exporters and industry bodies will be closely watching the developments.

"As a body of traders, we are closely monitoring the totalization agreement. During the last visit of Raimondo to India, the issue of statutory deductions and social compliance, which the industry complies with, was raised," said Ajay Sahai, director general & chief executive at the Federation of Indian Export Organizations (FIEO).

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“On the GSP front, we are hopeful that some progress will be made, although, with US elections around the corner, it might be a little early to think about this request to materialize. Additionally, we have requested the FDA (US Food and Drug Administration) to expedite approvals for certain pharmaceutical plants, which was discussed during previous engagements,” he added.

In 2019, the US withdrew GSP benefits for India. Indian exporters have sought the restoration of GSP benefits, which allow some developing countries duty-free access to developed nation markets.

India and the US are also negotiating a totalization agreement (SSA) to exempt Indian short-term visa holders from having to pay social security tax contributions in the US.

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Meanwhile, the Indo-Pacific Economic Framework for Prosperity (IPEF), spearheaded by the US, aims to improve economic cooperation across the Indo-Pacific region and is structured around four pillars – trade, supply chain resilience, clean economy, and fair economy.

India has signed agreements under the clean economy and fair economy pillars and is an observer in the trade pillar.

Sahai added that India is also seeking US approval to allow wild shrimp and fish exports.

India's merchandise exports to the US have risen 54.4% from $54.3 billion in calendar (CY) 2018 to $83.8 billion in CY 2023.

In the services sector, too, India's exports to the US experienced a notable increase, rising from $28.9 billion in CY2018 to $36.3 billion in CY2023, a growth of 25.6%.

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Meanwhile, US exports to India have seen good growth, with merchandise exports growing from CY$33.2 billion in CY2018 to $40.1 billion in CY2023, reporting a 20.8%. US services exports to India rose from $25.2 billion in CY2018 to $29.9 billion in CY 2023, reflecting a growth of 18.7%.

"India has seen significant growth in its exports to the US, particularly in merchandise, while the US has experienced more moderate growth in its exports to India," said Ajay Srivastava, a former trade official and founder of economic think tank Global Trade Research Initiative (GTRI).

"The increasing US trade deficit with India, particularly in merchandise, highlights the growing imbalance in trade between the two countries. The overall increase in bilateral trade underscores the deepening economic ties," he added.

In the 2024 National Trade Estimate Report on Foreign Trade Barriers, prepared by the Office of the United States Trade Representative (USTR), there are 15 pages dedicated to trade barriers (for US companies to do business in India), much higher than other developing economies like Mexico (6), Vietnam (7), South Africa (6) and Turkey (10).

‘High-tariff country, with lot of trade barriers’

"India is a high-tariff country, with a lot of trade barriers from the perspective of US-based companies who want to set up supply chains. While some of these issues have been addressed, a large number remain," said a trade expert, who earlier advised the government.

"When you meet for the Commercial Dialogues, you are not only talking trade but also trade barriers, attracting investment, IPEF and supply chain where India has made commitments. These would be the core issues of the upcoming discussion," the person added, requesting anonymity.

A spokesperson of the ministry of commerce and industry didn't respond to emailed queries.