INDIA: A PASSAGE TO EXPANDED TRADE
In the wake of President George W. Bush’s recent visit to India, expanded commercial ties between India and the United States offer big opportunities for U.S. businesses.
The United States and India are logical, natural partners, sharing the same bedrock of democratic values. Although the relationship has not always lived up to its economic promise, India is increasingly enjoying a consensus on the importance of economic growth to create jobs and to elevate the lives of its people. Whether we look at the 2 million Americans of Indian descent or the 85,000 Indian students who come here annually, we can see that there is a good fit between our two countries on a range of issues.
The economic numbers bear this out. Twenty-five years ago, total bilateral trade was only $2.8 billion. By 2005, that number had increased nearly tenfold to $27 billion. U.S. exports to India have nearly doubled in the past three years, from $4.1 billion in 2002 to nearly $8 billion in 2005. With a population of more than 1 billion, a growing middle class, and an economy with an 8 percent growth rate, India is increasingly of interest to U.S. companies as a market for goods and services.
The United States has hoped that India will be a more active partner in opening world markets to free and fair trade. India has already undertaken important moves toward liberalization, such as signing an open skies air services agreement with the United States and raising investment caps in several sectors. Also, import tariffs on most industrial goods have been lowered to 12.5 percent.
And there is evidence of results. The U.S. Commercial Service in India reports unprecedented interest by U.S. companies this year. State delegations from Illinois, Iowa, Michigan, and Rhode Island have visited India in the past few months.
Challenges Remain
Despite the encouraging trade numbers and the progress that India has made in implementing economic reforms in the past 15 years, a lot of ground still needs to be recovered if trade and investment are to reflect India's role in the world economy. India still has to make up for many years of little to no economic growth. As a point of reference, even with a 30 percent growth in U.S. exports last year, India accounts for less than 1 percent of all U.S. exports.
Among the challenges that remain are the following:
• High trade barriers. The more India can lower its barriers, the better off its people will be. Although India has significantly lowered tariffs on non-agricultural products, agricultural tariffs remain around 40 percent.
• Governance. If a society is hindered by corruption or bureaucracy, removing trade barriers will not help very much.
• Transparent and efficient legal system. This system is essential for translating the opportunity of market economics into benefits for India's citizens.
• Vibrant intellectual property rights (IPR) regime. Some progress has been made toward creating a more comprehensive framework for IPR protection in India. Still, India does not currently have a data exclusivity regime for pharmaceutical and agricultural products consistent with the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. Also, many people perceive an uneven enforcement of India's existing trademark and copyright laws.
• Open retail sector. Although India has recently opened up a sliver of its retail sector to foreign investment, that sector is still closed to most American retailers. Opening this sector would greatly benefit Indian consumers. It would allow them more convenient access to desired consumer goods at lower prices.
Opening a New Page: The Commercial Dialogue
While visiting India in March, President Bush agreed with Prime Minister Manmohan Singh to take several specific actions regarding the commercial dialogue between the two countries. This process began in July 2005, when the two leaders agreed to revitalize the bilateral Economic Dialogue. To fulfill that commitment, the U.S. Department of Commerce (DOC) and India's Ministry of Commerce and Industry have taken steps with their part of the Economic Dialogue—the Commercial Dialogue.
Both sides have committed to regular contact to discuss nuts-and-bolts issues that affect doing business in each other's markets. Under the Commercial Dialogue, a number of substantive public-private sessions have been held on standards. In general, principles on how standards are established, administered, and enforced by both countries were discussed.
The Indian government recently accepted the DOC’s proposal that the U.S.–India Commercial Dialogue be elevated, enhanced, and expanded and that it should demonstrate greater engagement by the two private sectors. The expanded agenda for the Commercial Dialogue covers IPR enforcement, antidumping and countervailing duty procedures, and commercial opportunities for small and medium-sized enterprises.
Future Steps
The upgraded Commercial Dialogue reflects the high level of importance that has been placed on improved commercial relations with India. The dialogue with India is one of only four such dialogues currently in progress, joining those with the North America Free Trade Agreement signatories, the European Union, and China.
In May, Under Secretary for International Trade Franklin L. Lavin will travel to India, where he will meet with Indian Secretary of Commerce S. N. Menon and other government officials. They will tackle the challenges that remain in this bilateral relationship. Much work remains, but all of the elements of success are there to ensure long-lasting progress in the U.S.–Indian commercial relationship.
Breaking into the Indian Market
The DOC recently designated India as a “spotlight” market for U.S. businesses. The U.S. and Foreign Commercial Service (USFCS) has identified some of the best prospects for U.S. exports to India. Those sectors include the following:
- Information and communications technology
- Medical equipment and health care
- Environmental technologies
- Renewable energy
- Travel and tourism
If you are a U.S. company looking to break into the Indian market as an exporter of goods or services, contact your local U.S. Export Assistance Center through the USFCS’s Web site, www.export.gov. You can also contact the Commercial Service’s India team directly by e-mail.