India-US trade: Joe Biden holds key to improved bilateral relations

With Democrat Joe Biden nearing majority to overthrow Donald Trump as the President of the United States, expectations heighten for improved bilateral trade ties with India. Besides restoration of the duty-free access scheme for New Delhi will be tough, a more lenient stance on the H1B visa regime and reformation and revival of the World Trade Organization (WTO) look likely, say experts.

Also, Biden is expected to soften the stance on Iran, which may mean India may be able to resume buying oil from the West Asian nation, say experts. Besides, with Democrats’ stance on China expected to remain the same, the advantage for India will likely to continue in terms of global supply chains.

“With Biden coming to power, some predictability in the trade regime is expected,” says Ajay Sahai, director general and chief executive officer, Federation of Indian Export Organizations.

While negotiations for a limited trade deal may remain tough under the Biden administration, it may hold talks for restoration of the duty-free access scheme called the generalized system of preferences (GSP) for India.

The Trump administration in 2019 removed India from the GSP list, under which it got duty-free access to over 2,000 products, including textiles and automobiles, asking India for reciprocity. New Delhi was one of the largest beneficiaries of the programme, with close to $6 billion worth of duty-free imports to the US in a year.

“It is likely that the Biden administration, if it assumes power, will negotiate to reinstate India’s position in the GSP,” says Jayant Dasgupta, India’s former Ambassador to the WTO.  He adds that it was quite likely that the US policy will be less transactional and oriented towards the long term, if the Democrats win the election.

Trump’s exit may also mean a revival of multilateral institutions, including the WTO, helping India in settling pending trade disputes.

“It is likely that the US will come back at the WTO table to reform the multilateral organisation. The appellate body is virtually absent now, with several cases pending against the US itself. That might change,” says Dasgupta. He added that the US increased duties on Indian steel and aluminium in the past few years, as it did for the alloy and the metal from China, Brazil, and a host of other countries. “These matters are pending with the WTO, which might get closure that benefits India,” adds Dasgupta.

Biswajit Dhar, professor, Jawaharlal Nehru University, agrees. “Trump has been dismantling multilateral institutions. That could now change. The Democrats could stick to the older ways of supporting these organisations,” he says.

India’s trade surplus with the US has seen steady decline under the Trump regime, with Washington pressing New Delhi to cut tariffs on US imports like motocycles, price controls on pharma and medical equipment. The trade surplus declined from $21.2 billion to $18.6 billion. India was forced to cut Customs duty by half on imported motorcycles like Harley-Davidson to 50 per cent after Trump called it ‘unfair’.

The return of Democrats may be a relief for Indian skilled workforce in terms of the visa regime. “If you go by the manifesto of the Democrats, they are talking about continuing with the H1B policy,” says Sahai.

In October, the Trump administration proposed to replace the computerised lottery system to procure the visa and replace it with a minimum wage system. The new H1B rules implemented by the Trump administration require organisations to raise the minimum wage of H1B visa holders by as much as 40 per cent, discouraging companies to hire H1B visa holders and rather hire locally. It also suspended the issuance of new immigrant visas until the end of the year in June.