India, US to talk trade for first time under Donald Trump

Commerce Minister Suresh Prabhu to visit Washington DC

The urgent need for a totalisation agreement, besides the long pending issue of higher charges for H-1B visas, will be taken up by India in its first ministerial-level deliberation with President Donald Trump-led United States later this week.

The deliberations will be a part of the upcoming two-day visit by Commerce and Industry Minister Suresh Prabhu to Washington DC starting Thursday. Prabhu is expected to meet US Trade Representative Robert Lighthizer as well as US Commerce Secretary Wilbur Ross, a senior Commerce Department official said.

The talks on trade come close on the heels of the first visit by US Secretary of State Rex Tillerson to New Delhi beginning Tuesday to reaffirm the bilateral strategic partnership. 

Currently, bilateral trade between the countries is more than $100 billion (around Rs 6.67 lakh crore), with the merchandise trade accounting for $64.51 billion (around Rs 4.14 lakh crore) both ways. Both the sides have agreed to increase this to $500 billion in the coming years.

While India wanted to merge the talks with the three-year-old Strategic and Commercial Dialogue, the Trump administration, which took charge in January, earlier this year, suggested another format for the talks, the senior official quoted above said.

Totalisation agreement priority for India

India is tipped to push for a totalisation agreement that will allow temporary Indian workers in the US to repatriate their social security contributions when they leave the country.  In its annual meeting in July 2015, India had pressed for setting up a high-level group to discuss its concerns on the Totalisation and Social Security Act of the US.

According to India, this law discriminates against Indian workers in the US, who end up losing their social security contributions because of a discrepancy in the visa and social security schemes.

India wants early conclusion of the issue, aiming to protect the interests of Indian professionals who contribute around  $1 billion (Rs 6,670 crore) each year to the US social security. Under this pact, professionals of both the countries would be exempted from social security taxes when they go to work for a short period in the other country.

Former Commerce Minister Nirmala Sitharaman had tried to maintain a tough stance on totalisation. Earlier this year, she had said the US government should realise that the subsidiaries of US companies based in India also send their earnings to the US. Experts asserted that her statement meant that the government might be exploring capping royalty payments by India-based subsidiaries to US companies as an option.

Such a move ran the risk of harming investors' confidence in the country, experts said. Royalty is paid to a foreign collaborator for transfer of technology and use of brand names or trademarks. “Any move to curb royalty payments will dent investor confidence and be retrospective since such conditions were not present when those investments were made," Jayant Dasgupta, executive partner at legal firm Lakshmikumaran and Sridharan had said.

Lowering the ticket to the US 

The issue of increase in visa fee and reduction in the number of available H1B and L1 visas proposed by the US lawmakers will also be discussed. While India claims it will adversely affect the Indian information technology industry, previous US Commerce Secretary Penny Pritzker had claimed earlier that a majority of such visas were granted to Indians.

"In 2014-15, as much as 69 per cent of all the H1B visas and 30 per cent of L1 visas were issued to Indians,” she had said. Indian companies are an important part of the US economy, with the Indian foreign direct investment into the US reaching in $11.8 billion in 2015.

Other sticky issues

The government may also push to break through some of the differences in policy stances that have deadlocked the India-US bilateral investment agreement, another official said. However, Edward Monser, vice-chairman of the US-India Strategic and Partnership Forum recently said that he doesn't believe the issue ranks as a high-level priority for the US government as of now.

On the issue of Intellectual Property Rights (IPR), India has consistently maintained its stand that its IPR laws are compliant with the global and World Trade Organisation (WTO) norms, but the US has raised concerns over the patent regime, particularly in the pharmaceuticals sector. On trade secrets, the US wants a separate law.

Crucial issues like visa regulations, customs cooperation, greater market access for goods, and intellectual property rights are also expected to be discussed.

The US is the sixth largest source of foreign direct investment (FDI) into India. The cumulative FDI inflows from the US during April 2000 to June 2017 amounted to $20.98 billion constituting 6 per cent of the total FDI inflows into India. However, investments slid from more than $4.12 billion in 2015-16 to $2.37 billion in 2016-17.