As two of the largest democracies in the world, the United States and India have always had a strong economic relationship. The two countries have been trading partners for decades, but have yet to form a comprehensive trade agreement. However, in recent years, there has been renewed interest on both sides in forging such a pact.
Discussions around a US-India trade agreement first began in 2007, but negotiations stalled due to disagreements over issues such as intellectual property rights and agricultural trade. However, in 2019, President Trump and Prime Minister Modi announced that the two countries would work towards a “limited trade deal” aimed at reducing tariffs on some goods and increasing access to each other`s markets.
Although the deal has not yet come to fruition, the potential benefits of a US-India trade agreement are clear. India is the world`s fifth-largest economy and a rapidly-growing market for American goods and services. According to the US Trade Representative`s office, US exports to India totalled $33.4 billion in 2019, making it one of America`s top trading partners.
A trade agreement would help to further boost US exports to India by reducing tariffs on American goods and opening up new markets for American companies. For Indian consumers, this could mean access to a wider range of high-quality American products at more affordable prices.
Furthermore, a trade agreement could help to strengthen economic ties between the two countries, leading to increased investment and job creation. This is particularly important given the economic impact of the COVID-19 pandemic, which has caused severe job losses and economic contraction in both countries.
However, there are also potential challenges to consider. For example, American companies have expressed concerns about India`s stringent data localization rules, which require companies to store Indian citizens` data on servers located within the country. This could pose a challenge for American tech companies looking to expand in India.
Additionally, India`s agricultural sector has traditionally been protected by high tariffs, which could be a sticking point in trade negotiations. American farmers are eager to gain greater access to India`s market, but Indian farmers are wary of increased competition and the potential impact on their livelihoods.
Despite these challenges, the potential benefits of a US-India trade agreement are significant. As both countries look to recover from the economic effects of the pandemic, a trade deal could help to spur growth and job creation, while strengthening ties between two of the world`s largest democracies.