PM Modi recently had a very successful visit to the US, where he met US President Joe Biden and American business CEOs for a discussion on a number of issues related to tech, finance, & investment. There are clear signs that indicate trade relations between the US and India are only going to get better with talks going on for India’s inclusion in America’s GSP program.
PM Modi recently had a very successful visit to the US, where he met US President Joe Biden and American business CEOs for discussion on a number of issues related to tech, finance, & investment. There are clear signs which indicate that trade relations between US and India are only going to get better in the future with talks going on for India’s inclusion in America’s GSP program.
This week, Prime Minister Narendra Modi completed a successful visit to the United States, and US retailers wonder if trade relations between the two countries will soon improve. On Thursday, PM Modi met favorably with five American Business CEOs – where the sessions leaned towards tech, finance, and investment. On Friday, he met directly with President Biden, and Trade was on the agenda.
The good news is that the India-US Trade Policy Forum is scheduled to meet before the end of 2021, and that, by itself, is a positive sign for improved trade relations simply because they haven’t held a meeting since 2018. The US, under the Biden administration, has been walking a tightrope between its desire to see India act more democratically on human rights while also having India as a critical ally to buffer the relationship with China.
During the prior administration, it was clear that former President Trump was pro-India, but his trade policies actually pulled us further apart. We recall the famous “Howdy Modi” event in Texas on 9/22/2019, where both Prime Minister Modi and President Trump appeared in front of about 50,000 attendees. Then, President Trump went to India on 2/24/20 for the “Namaste Trump” event, which drew more than 100,000 people. “America loves India.” The former President said at the event, “America respects India, and America will always be faithful and loyal friends to the Indian people.”
While former President Trump was projecting all his love in the background – his administration was busy disrupting India’s trade benefits from steel to aluminum to GSP. It all seemed to catch fire when President Trump removed the Generalized System of Preferences (GSP) program in 2019, which provided duty-free access to the US for select products from India. Unfortunately, at the time of removal, India was the biggest user of the GSP plan – which included auto parts, jewelry, pharmaceuticals, agriculture, and a host of other items. Overall, GSP covered about 12 percent of India’s exports or 6 billion dollars. India hit back as GSP was pulled, and they proceeded to tariff 28 US categories of imports, including apples, which was quite sensitive for several American apple-growing states.
US Senator Maria Cantwell’s Washington State had a vested interest in exporting apples to India, and that came to light when she was one of the interviewers for President Biden’s incoming United States Trade Representative. When Katherine Tai (USTR) was being questioned for her job, Senator Cantwell (D-Wa) asked: “When would the Biden Administration restore India’s GSP status and help us with apple exports?” Candidate Tai said in response: “Let me say that if confirmed, this is high on my radar.”
Trump’s GSP removal was probably more political than practical. His primary issues at the time were duties on US Whiskey and Harley Davidsons and, perhaps, his administration thought they could force their way into a quick deal. Reviewing data from the period in question, India was probably hurt less by the loss. At the same time, American consumers were forced to pay more for products, and American exports to India suffered.
The US remains India’s top export partner and their second largest source of imported products. India could easily buy more from the US, and they are America’s 12th largest export partner and 10th largest import partner (per available 2019 data).
Prime Minister Modi reiterated to President Biden this week: “Trade holds importance on its own between India and the US. In this decade, we can be complimentary to each other. There are many things with the US, that are needed by India and many things with India that can be useful to the US. Trade will be a major sector in this decade.”
When both former President Trump and President Biden ramped up pressure on those in the US who purchase products from China, the use of the GSP program would have been a helpful tool for US importers to level the playing field (by moving products away from China). Travel goods, for example, (suitcases, bags, and backpacks) were added to GSP offerings in 2015, and more than $5 billion worth of products has since left China for GSP-eligible countries.
India, with their incredible ability to make leather products, would have been a logical sourcing destination for travel goods (like handbags), but, as mentioned, they were excluded from the GSP program at a time when it was probably needed the most. In addition to the potential for restoration of India’s GSP benefits, there is a movement in Washington, DC, to add some select groups of non-competing footwear to the GSP agenda. India would be a highly logical manufacturing location for these additional potentially displaced goods from China.
There has also been a strong rumor since 2018 that America and India were considering a Free Trade Agreement. That, of course, would be welcome news for both countries, simply because neither is currently a member of any large trading block covering the region – including the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) or the RCEP (Regional Comprehensive Economic Partnership).
Reinstating India to America’s GSP program would be an excellent first step to improving the trade relationship and certainly a sign of good faith towards a much larger free trade agreement.
In addition to this week’s positive meeting in the Oval Office, Prime Minister Modi shared documents indicating that President Biden potentially has some confirmed distant family relatives living in India.
Perhaps, for those looking for cosmic signs of a better relationship between the world’s two largest democracies, family ties are always a good place to start.
About the author: Rick Helfenbein is a Fashion Industry & Retail Consultant. He was the former Chairman, President, and CEO of the American Apparel & Footwear Association. He has appeared for industry comment on CNN, CNBC, FOX, BBC, Yahoo Finance, Newsy, and Bloomberg.