India’s Trade Barriers Restrict Access to Foreign Investment

India remains a land of high tariffs, impacting U.S.-India trade in significant ways that must be addressed as the two countries continue to work towards the trade deal that U.S. President Donald Trump and Indian Prime Minister Narendra Modi touted last month in Houston.

The Alliance for Fair Trade with India (AFTI) works tirelessly for constructive progress in the U.S.-India trade relationship to create a healthy, balanced, commercial relationship which benefits both India and the United States. Unfortunately, India’s persistent trade barriers harm U.S. exports and jobs, and restrict Indian manufacturers’ access to American goods that provide critical inputs and U.S. investment.

Despite taking some meaningful steps forward in 2017 to improve its overall intellectual property environment, India’s trade barriers are not going away. As demonstrated in comments made by AFTI to the Office of the United States Trade Representative (“USTR”) for its 2019 National Trade Estimate Report on Foreign Trade Barriers (“NTE Report”), India maintains high tariffs on a range of manufactured products including automobiles, motorcycles, textiles, distilled spirits, pharmaceuticals, and rubber.

In 2018, India imported an estimated $33 billion worth of U.S. goods. If India removed discriminatory trade barriers, U.S. exports to India would likely rise by two-thirds and U.S. investment would roughly double, creating more U.S. jobs and investment for industries that export products to India.

Recent examples of India’s foreign trade barriers are consistent with elements of Prime Minister Modi’s “Make in India” campaign:

  • · Imported spirits into India face a tariff of 150 percent, which severely restricts access to the Indian market for U.S. spirits exporters into the world’s largest market for whiskey.
  • · According to World Trade Organization (WTO) estimates, India’s applied most favored nation import tariffs are 13.8 percent and highest of any major economy.
  • · According to the EU-U.S. and Swiss-U.S. Privacy Shield Framework, from November 2017 through March 2018, India raised import duties from zero percent to 60 percent on chickpeas, 50 percent on peas, 40 percent on large chickpeas, and 30 percent on lentils, severely impacting U.S. pulse exports to India.
  • · For fruits and vegetables, India’s tariffs are boundat an average of 101.1 percent with a maximum of 150 percent.
  • · India recently increased customs dutiesand withdrew duty exemptions on a wide variety of imported products (such as metal products, auto parts, closed circuit television cameras, synthetic rubber, specific chemicals, electronic components, and other items).

While India’s trade policies penalize American exports, they also harm its own growth. India’s self-imposed trade barriers raise costs and limit choice for Indian companies and consumers, shielding their markets from global competition and partnerships that would equip them to innovate and grow.

If Prime Minister Narendra Modi hopes to achieve his vision of India becoming a $5 trillion economy by 2024-2025, India must enact significant trade policy reforms to attract foreign investment – and that means taking steps to lower its high tariffs.  Such reforms would advance a truly fair and bilateral U.S.-India trade partnership would reap monumental economic benefits for both countries, including increased innovation and job creation.  And addressing these issues directly would provide a strong foundation for the type of robust relationship that the two leaders clearly want, and that our two countries clearly need.