India-US trade relationship will continue to grow: Dilawar Syed
The US is bullish about its trade relationship with India and expects it to grow rapidly. In a free-wheeling chat with BusinessLine, Dilawar Syed, Special Representative for Commercial and Business Affairs, Bureau of Economic and Business Affairs, US Department of State, talked about what is special about this relationship and what more needs to be done to take it to the next level. He also spoke about what India needs to do to punch at its weight. Excerpts:
How best can you describe the current economic partnership between India and the US?
The US-India economic relationship is an enviable one. If you look at the trade data between the two countries, it is probably one of the fastest growths recorded by any other nation. It is also broad and not just restricted to a particular sector like software and technology.
We have partnerships in aviation and defence, heavy equipment and energy. So, it is one of the most vibrant, dynamic, and sizable (economic) relationships.
It is only going to grow because one, India is a large market, two, it has got incredible talent, three, its ability to help with R&D and four, India has a strong diaspora in the US. So, we feel very bullish and we think of it as a strategic relationship and not just transactional.
It is strategic because we want to make sure we put our values, especially the importance of transparency, privacy and respect for human rights. Those things go hand-in-hand with doing business and India can be a great partner in that part.
Bilateral trade agreements seem to be the order of the day across the world. But the US does not appear to be keen on a free trade agreement (FTA) with India…
Both the countries are firing from all cylinders when it comes to trade. India is at a trade surplus so that’s where the reality is. Some US companies are even paying 30 per cent duty on biotech products, which are very important for human health. So, there is a lot we can do in terms of bringing down tariffs for American company exports.
We know our Ambassador had a dialogue with India’s Commerce Minister Piyush Goyal and they are engaging in a trade framework. India is also a founding member of the Indo-Pacific Economic Framework (IPEF). So, we have several forums where we are having these conversations.
Given the breadth (of trade collaboration), it takes a lot of engagement to see where we can improve. It’s a healthy relationship when it comes to bilateral trade and India already is a sizable one with a trade surplus. We are continuously talking about how to improve it further.
Do you think focussed bilateral arrangements like FTA or a comprehensive economic partnership will help? Is there anything on the anvil?
People are buying Indian products because they are great. Similarly, consumers are engaging with the US companies because our products are also really good. At the end of the day, that’s what defines the relationship.
We are working on improving the environment so that both countries can do even better trade. We will continue these conversations. These are sizeable economies with massive trade volumes and you have to go through certain things as you build the relationship.
Which potential sectors/areas where both countries can cooperate even better?
Software and tech have so much headroom for growth. There is so much digitisation happening that is transforming our relationship. Many of the US corporations are operating from India and we also have start-up communities here often benefitting from the US investors. That’s an area we want to continue and make sure that it is on the growth path.
Secondly, we have seen supply chains have been affected globally because of the Covid-19 pandemic and Russia’s invasion of Ukraine. We can no longer rely on those supply chains. There are areas within these supply chains where India could step up even more.
US President Joe Biden launched the Supply Chain Resilience Initiative. For instance, in the case of semiconductors, we are relying only on one country Taiwan for the super majority of the world semiconductors supply. That’s a lop-sided scenario. Similarly, energy and food insecurity are some of the sectors prioritised by the US President to welcome our allies to invest more.
I always feel, in the case of semiconductors, we should deliberate about India stepping in to produce producing more semiconductors so that it helps India as well as the world. I would see some of these challenges as opportunities for India to step up, especially in the area of electronics and semiconductors, food and energy space as well.
India aims to become the manufacturing base for the world taking advantage of China+1 strategy adopted by global companies. What should India do to achieve that?
I think, on its own merit, India has that advantage. It just has to punch at its own weight. It’s already doing pretty well. India has a huge economy and its trade has blossomed. It could happen even more. To give you an example, there are 25,000-30,000 graduates just in the bio disciplines in Tamil Nadu alone, which is just one State, and we are talking about just one sector.
Couple of things I would encourage: Firstly, talent. India has an abundance of talent, so it should make sure the curriculum is modern, and make sure the folks have adequate skill sets to work in global companies.
Secondly, on the regulation side with regards to IP laws, India should make sure that the US company’s IPs are protected. Can I walk into the Indian market as a knowledge product company and feel comfortable that my hard-earned IP is protected? Given India’s incredible global powerhouse status, we need to up the game there.
Thirdly, we are getting a lot of feedback on Goods and Services Tax (GST). Before my visit, I spent some time with some Indian companies in the US to get their feedback. Their request is about simplification of taxes and making sure it is not burdensome.
All these issues are solvable and it is natural for an emerging global powerhouse to go through this. We want to encourage making the business environment even more friendly to US investors and companies.
India and the US are natural allies but some recent geopolitical developments have forced India to take a stand that may not be in the interest of the US. Will it affect the strategic relationship between the two countries?
We take stances that are aligned with our values. India should take stances that align with its values. No two friends, in any context, can agree on everything. We have taken a very clear stance in support of freedom in the world and we will continue to do so. If it’s about human rights, we will continue to do so.
That’s how we look at it. We may not agree on everything but the breadth of our relationship and the engagement at all levels, not just economic but even social, is very deep and will continue to grow.
What are the chances that the US will slip into a recession?
I don’t think anybody can put a number on that but the reality is we have historically low levels of unemployment, and the base and fundamentals of the US economy are extremely strong. But, it’s not only about the US, even India’s trade deficit numbers and what’s happening in Sri Lanka is unthinkable. These are all results of shocks to the supply chain created by the pandemic and Russia’s invasion of Ukraine.
As long as those two things are on our front, we will have uncertain environments whether it’s India’s case of trade deficits or what we are seeing in the US. But the good news is we (the US) have very low unemployment; our fundamentals are strong and our President is fully focussed on arresting the inflation challenges. But I don’t think anybody can say with certainty whether or not we will see any economic cycle.