Trump-Modi talks can aid breakup of burdensome barriers to India trade
By Linda Dempsey, Vice President of International Economic Affairs at the National Association of Manufacturers
President Donald Trump will host Indian Prime Minister Narendra Modi at the White House next Monday for their first in-person bilateral meeting. This interaction will break the ice and set the tone for the potential resolution of the most important commercial issues between the two countries for years to come.
Manufacturers are watching closely and pressing for a dialogue that centers on promoting economic growth and reforms that will lead to tangible and lasting improvements to India’s challenging business environment.
Prime Minister Narendra Modi stepped into office three years ago with a pro-business agenda, sparking hope in manufacturers across to the United States who are eager to do business in the world’s largest democracy. Since that time, the U.S. and Indian governments have discussed trade and economic issues during state visits and high-level dialogues, such as the Strategic & Commercial Dialogue (S&CD) and Trade Policy Forum (TPF).
President Trump has already had several calls with the prime minister focused on areas of cooperation. Over the last three years, in these meetings and through independent declarations and initiatives, Prime Minister Modi has made repeated promises to improve the business environment in India, to open up the country for investment and to boost innovation by protecting investors’ intellectual property.
Actions, however, speak louder than words. Manufacturers have seen some steps in the right direction. Announcements of sector-specific foreign investment openings, policy initiatives related to energy and infrastructure, administrative licensing and passage of legislation related to bankruptcy and tax reforms have all been welcomed developments.
But manufacturers are still waiting for the majority of these promises to translate into real progress on long-standing issues. Prime Minister Modi talks about the benefits of a strong bilateral trade relationship with the United States, but the truth is more sobering: The U.S.-India relationship continues to lag its potential by a large margin.
The National Association of Manufacturers’ recent scorecard on India’s business environment shows the relationship is still one-sided. While India enjoys full access to America’s open markets, U.S. manufacturers and workers continue to face substantial Indian trade barriers, such as high tariff rates, burdensome and unclear customs regulations, forced localization barriers, inadequate intellectual property protections and investment limitations that block U.S. exports and discriminate against U.S. products.
U.S. exports to India face an average applied tariff six-times higher than U.S. duties on Indian goods and face complex customs procedures that hamper cross-border trade. India’s forced localization policies and investment limitations across key U.S. manufacturing sectors, such as solar energy, information technology and medical equipment also add to the cost of participating in the Indian market.
Despite announcements of investment openings in various sectors and plans to streamline onerous licensing and government approval processes, manufacturers have seen incomplete implementation and new investment restrictions in some sectors.
India’s weak IP environment is also a serious concern for all manufacturers and innovators, as India’s policies fail to provide adequate protection of patents, copyrights and trade secrets and threaten manufacturers’ ability to compete. These longstanding trade barriers take a major toll on the trade relationship. It should come as no surprise that the United States exports fewer manufactured goods to India than to countries with economies less than one-quarter the size, such as Belgium and Singapore.
However, the economic potential of a strengthened India-U.S. bilateral commercial relationship is too great not to pursue. Improving the business and IP environment in India would not only benefit manufacturing, jobs and economy in the United States, but would increase investment and spur innovation and economic growth in India.
The White House has stated that President Trump and Prime Minister Modi will look to outline a common vision for the United States-India partnership that is worthy of their citizens. Manufacturers across the country want to see this partnership prioritize economic issues and include concrete steps to tackle trade barriers that have long plagued their success in India.
All of this would be in line with President Trump’s strong commitment to leveling the playing field for American businesses operating abroad. Manufacturers are hopeful that President Trump and Prime Minister Modi can work together to turn rhetoric into concrete policy reforms to spur the U.S.-India economic relationship to reach its full potential and to create new jobs and economic opportunity.
Linda Dempsey is the vice president of international economic affairs at the National Association of Manufacturers, the nation’s largest manufacturing industrial trade association.