“There is not a huge appetite in Washington for Free Trade Agreements (FTAs) but I do think there is an openness in Washington to advance a discussion about preferential trade between our countries. And so, I look forward to a new government here, and out people stand ready, willing and available to begin those sorts of scoping discussions”, said Eric Garcetti in an interview.Â
It is interesting to see that in 2022 December, USA has categorically rejected any possibility of FTA with India. So what has changed from then to now that USA is so desperate to sign a FTA with India?
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Why USA Didn't Want to Sign FTA With India Earlier?
It was December 2022 when the then US Ambassador to India denied the possibility of signing FTA with India. The reason is circumstances were different at that time.
Circumstances in 2022
- USA was India’s largest trading partner. Anyway, the trading was going well. So they felt no need to sign FTA.
- The idea of signing a FTA between the two countries was put forward by Trump Administration. The Biden administration was not very interested in the idea. This was another a big reason for not signing a FTA.Â
- But the biggest reason that USA gave at that time was they believed that India’s trade barriers are too restrictive due to which they thought if we sign a FTA, It may happen that India increases its exports to America but America is unable to increase its trades with India.
India too had replied in the very next Jan 2023 i.e. it’s okay. If you do not want to sign a FTA with us then we are also not very interested doing a FTA with you. That was the story so far but it seems USA is slowly taking a U-Turn on this FTA issue.Â
India-USA FTA Deal Checkpoints
When FTA discussions were in picture India had put some conditions and after one and a half year the India’s conditions will not change as such. Let’s see these conditions one by one.Â
Condition 1: India Demands Market AccessÂ
“Rather than that, we are focusing on greater market access. We are focusing on ease of doing business between the two countries, you are looking at bilaterally , a much larger footprint between the two countries, for trade, investment and business”, said Mr. Piyush Goyal, Minister of Commerce and Trade.
India wants more market access in US so that it can increase its exports.
Condition 2: India Asks GSP Status to be Restored
“I have placed on record our requests that GSP should be restored. But I can assure you the trade between the two countries continues to expand very rapidly. I do not think that GSP withdrawal has been the detriment of growing trade ties”, said Mr. Goyal.Â
The Generalized System of Preferences (GSP) status granted to India by the United States was a trade preference program designed to promote economic growth in developing countries. Up to its end in June 2019, many Indian products could enter American markets duty-free because to the GSP designation that the United States granted to India. This encouraged trade.Â
India was the largest beneficiary of the Generalised System of Preferences (GSP) status in 2017, with $5.7 billion worth of imports into the US given duty-free status. About 2000 products including auto parts and textile materials were allowed to enter the US market duty-free.
Why USA Wants to Sign FTA With India Now?
India is the fastest growing major economy in the world right now. Many countries wants market access in India because it offers a huge market of 1.4 billion people. Looking at the government attitude, it seems that India will continue to grow with a very impressive speed for the next 5 years at least.Â
There are mainly two reasons that compels USA to sign FTA-
- India Emerges as a low-cost producer: “India emerging as a low-cost producer in areas like electronics and for components in the clean energy sector would help in scaling up bilateral trade while accelerating India’s economic growth”, US Ambassador Eric Garcetti said.Â
- USA don’t want their market get flooded with Chinese goods: It was just 15 days back when America imposed heavy import duty on many chinese products. The new measures affect $18 billion in imported chinese goods including steel, aluminium, semiconductors, electric vehicles, critical minerals, solar cells and cranes, the white house said.
Conclusion
So the overall story is like this…
- Earlier USA didn’t want to sign FTA with India but now has expressed interest to do it.
- India has imposed some conditions for signing FTA which demands greater market access and GSP restoration.Â
- USA don’t let China to flood its market with Chinese products so it imposed heavy import duty on so many Chinese goods. That’s why USA has now turned to India to procure many items that were previously imported by China.Â
- India enjoys a trade surplus with USA. So India should be very careful while signing the FTA as this trade surplus may get disturbed and USA is the only country in India’s top five trading partner with which it enjoys a trade surplus.
