India and the United States are poised to initiate discussions to strengthen their trade relationship, coinciding with Prime Minister Narendra Modi’s upcoming visit to the U.S. This development underscores the deepening ties between the world’s largest democracies, focusing on economic collaboration and mutual growth.
Background
The U.S. is India’s largest trading partner, with bilateral trade surpassing $118 billion in the 2023/24 fiscal year, and India maintaining a trade surplus of $32 billion. Despite this robust relationship, trade tensions have surfaced in recent years. The U.S. has expressed concerns over the high tariffs India imposes on American products, leading to discussions about creating a more balanced and fair trading environment.
Recent Developments
In anticipation of Prime Minister Modi’s visit, both nations have engaged in preliminary talks to address these trade disparities. Discussions have centered on reducing tariffs and enhancing market access for specific goods. India is considering lowering import duties on over 30 items, including luxury cars, solar cells, and chemicals, which could lead to increased imports from the U.S. This move aims to reduce average tariffs and address U.S. concerns about trade imbalances.
Additionally, the two countries are exploring out-of-court resolutions for several trade disputes pending at the World Trade Organization (WTO). With the WTO’s appellate body currently non-functional, an out-of-court settlement appears to be the most viable option to resolve these issues amicably.
Strategic Trade Dialogue
Ahead of the Prime Minister’s visit, India and the U.S. held the inaugural meeting of the India-U.S. Strategic Trade Dialogue (IUSSTD). This dialogue focused on facilitating the development and trade of critical technologies, including semiconductors, space, telecommunications, quantum computing, artificial intelligence, defense, and biotechnology. Both sides reviewed relevant export control regulations to build and diversify resilient supply chains for these strategic technologies.
Leadership Engagement
The anticipated meeting between Prime Minister Modi and President Donald Trump is expected to further these discussions. Both leaders have previously emphasized the importance of fair trade and have expressed a commitment to strengthening economic ties. In a recent phone call, President Trump highlighted the need for India to purchase more American-made security equipment and work towards a fairer bilateral trading relationship.
As Prime Minister Modi prepares for his U.S. visit, the focus on initiating free trade talks signifies a mutual desire to enhance economic cooperation. By addressing existing trade disparities and exploring new avenues for collaboration, both nations aim to foster a more balanced and prosperous partnership that reflects their shared democratic values and strategic interests.
