With Indo-U.S. trade deal off, it is time India reorients its global economic engagement

India’s largest trading partner, and one with whom it has a significant trade surplus, the U.S., is no longer interested in securing a bilateral free trade agreement (FTA), as per indications from the Joe Biden administration. An official acknowledgement of this, from Commerce Minister Piyush Goyal, suggests that years of negotiations towards a ‘mini-trade deal’ followed by a full-blown trade pact that Mr. Biden’s predecessor oversaw may well be infructuous now. The Government will now seek to work on market access issues on both sides, he said, adding that lowering of non-tariff barriers, mutual recognition pacts and adopting common quality standards can also help Indian exports in the interim. There is a possibility that even these issues, which include long-festering dissonances over providing access to U.S. agricultural products or easing import duties on automobiles and Bourbons, would have to be discussed afresh. On Friday, the U.S. envoy to India met Mr. Goyal for what he said was a parley on attaining the $500 billion bilateral trade vision of the U.S. President. The trade target, set when Mr. Biden was the Vice-President in the Barack Obama regime, remains unchanged, but the tools for achieving it are no longer clear. India was pulled out of the U.S.’s Generalized System of Preferences (GSP) that granted some tariff relief to its exports by the Trump government in 2019 and hopes of its reinduction through a mini-trade deal now appear bleak. While India was expected to gain from the Sino-U.S. trade wars under the Donald Trump administration, its retaliation to the GSP status revocation with hiked tariffs on U.S. products had led to frictions that perhaps stymied the conclusion of a mini-trade deal before the change at the helm in the White House.

The U.S.’s no-go stance on the FTA implies ambitions may have to be pared down but also provides an opportunity for India to holistically review its stance on global trade. It is refreshing that Mr. Goyal has signaled a revamped approach towards FTAs and reminded Indian industry there cannot be one-way traffic. This needs to be matched by actions that start unwinding India’s creeping walls of import tariffs. The Atmanirbhar Bharat campaign has further exacerbated that view — as the advent of a protectionist ‘closed market’ project. Strenuous exhortations that the self-reliance drive is one that seeks to integrate with global value chains can only go so far. Trade policy cannot be perpetuated in isolation and, in fact, affects investments too. Having walked out of RCEP, India needs to demonstrate to its potential FTA partners, including the EU and the U.K., with which rivals like Vietnam have already sealed a deal, that it is a viable alternative to China in a post-COVID world. To be a major trading and manufacturing nation, India can ill-afford to keep sending mixed signals.

(The Hindu)