CUTS Washington Monthly Brief
#11, February 2019
Building Momentum for Indo-U.S. Trade to US$500bn by 2025 and US$1tn mark by 2030

For almost a year now, the U.S. has incessantly put trade restrictions on China, and others, on the pretext that they have allegedly exploited its markets without reciprocating. As expected, the U.S. has attracted retaliatory tariffs but the administration seems unbending until the alleged countries succumb to work around a fair and reciprocal access for U.S. trade and investments into their markets.

In this scenario, the global economy is suffering while businesses are disrupted worldwide and compelled to find alternative destinations for manufacturing, sourcing and supplying purposes. A report, released by the United Nations Conference on Trade and Development (UNCTAD) is a testimony to the fact. It says that India is among handful of countries that will benefit from the trade and investment diversion.

This coincides with sentiments of stakeholders in India and the U.S. to accelerate bilateral trade and economic partnership. In a recent event of Consumer Unity & Trust Society (CUTS) held on February 26, 2019 in New Delhi, Frank Islam, a prominent Indian American business leader, mentioned that according to some experts US$1tn mark in bilateral trade by 2030 is possible.

Similar expressions from the two governments, private sector and civil societies vouch to take the bilateral trade to US$500bn by 2025. Let me contextualise the required pace of growth through 2025 for the benefit of stakeholders. Between the year 2000 and 2017, total trade in goods and services between India and the U.S. has increased from US$19.1bn to US$126.2bn – more than six-fold increase with a compound annual growth rate (CAGR) of 11.75 per cent. In order to increase our bilateral trade more than four-fold – i.e. US$500bn by 2025 – this rate of growth has to be 18.78 per cent. Is it possible?

The discussions in a recently held bilateral commercial dialogue, i.e. the India U.S. Commercial Dialogue & India U.S. CEOs Forum were largely positive and looks set to further the momentum.

It highlighted the need to further the cooperation in energy and environment, information and communication technology, emerging technologies and digital infrastructure, entrepreneurship and inclusive growth, infrastructure and manufacturing. The CEOs Forum recommended setting up of three working groups on financial services, healthcare and defence. These are sectors wherein active and incremental cooperation can help unleash the bilateral economic potential in a timely manner.

In May 2019, the U.S. Department of Commerce will organise the Trade Winds event in India that will bring together small and medium-sized enterprises from both countries for knowledge exchange and partnership. These are very positive and constructive steps.

Achieving the bilateral trade potential will not be a cake walk as concerns around trade barriers, market entry restrictions, VISA, labour and intellectual property, among regulatory and infrastructure barriers on both sides remain. But it seems doable given the constructive role played by our governments, the Indian American community, businesses, civil societies and academia in improving relations before and in particular over some of these years.

This is the time when we must sustain the momentum, collaborate more in favourable geo-economic circumstances, ground work done and initiatives taken and come together to transform the Indo-U.S. trade and economic partnership.

                                                                                                                                     Pradeep S. Mehta
P.S. On February 20-24, 2019, the U.S. government and defence private sector players actively participated in the Aero India Show in Bangalore where inter alia Lockheed Martin announced a new fighter jet F21 especially designed for India and to manufacture and export the same out of India.

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This is the eleventh edition of the monthly brief from the Center, which carries select published news or comments on a relevant issue. There are equally important issues which may have been missed out to keep the Monthly Brief short and swiftly readable.
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