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Updated October 2, 2019
U.S.-India Trade Relations
The United States and India view one another as important
originally to 15% to 20%. The United States and others
strategic partners to advance common interests regionally
question India’s compliance with the WTO Information
and globally. Bilateral trade in goods and services is about
Technology Agreement (ITA). India also raised duties on
3% of U.S. world trade, and has grown in recent years
certain “non-essential” consumer and other goods to stem
(Figure 1). The trade relationship is more consequential for
its current account deficit. The EU initiated WTO dispute
India; in 2018, the United States was its second largest
settlement consultations, claiming that certain tariff hikes
export market (16% share) after the European Union (EU,
by India exceed bound rates. The United States and several
17.8%), and third largest import supplier (6.3%) after China
other countries have requested to join the WTO
(14.6%) and the EU (10.2%). U.S.-India foreign direct
consultations against India. U.S. concerns over Indian
investment (FDI) is small, but growing. Defense sales also
market access also include price controls on medical
are significant in bilateral trade. Civilian nuclear commerce,
devices, and investment and other non-tariff barriers.
stalled for years over differences on liability protections,
India opposes the 25% steel and 10% aluminum tariffs that
has produced major potential U.S. supply contracts.
the United States has imposed on trading partners under the
Figure 1. U.S. Trade and Investment with India
national-security based “Section 232” law. India did not
receive an initial exception like some trading partners, nor
negotiate an alternative quota arrangement. India supplied
1.3% of U.S. steel and 3.4% of U.S. aluminum in 2018.
India repeatedly delayed applying planned retaliatory tariffs
against the United States, hoping to reach a bilateral
resolution on trade issues. Soon after India lost its GSP
eligibility, India announced it would impose higher tariffs
affecting about $1.4 billion of U.S. exports, such as nuts,
apples, and chemicals. The United States and India are
challenging each other’s tariff measures in the WTO.
U.S. Generalized System of Preferences (GSP). Effective
June 5, 2019, President Trump terminated India’s eligibility
for GSP, a U.S. trade and development program, for failure
to provide equitable and reasonable market access. GSP
provides nonreciprocal, duty-free tariff treatment to certain
products imported from qualifying developing countries.
The President’s determination followed a U.S. investigation
into India’s market access practices based on petitions by
U.S. dairy and medical technology industries. In 2018,
Source: CRS analysis, Bureau of Economic Analysis (BEA) data.
India was the largest beneficiary of GSP; over one-tenth
The Trump Administration, which views bilateral trade
($6.3 billion) of U.S. goods imports from India entered
balances as an indicator of the health of a trading
duty-free under the program, such as chemicals, auto parts,
relationship, takes issue with the U.S. trade deficit with
and tableware. GSP removal reinstated U.S. tariffs, which
India, and has criticized India for a range of “unfair”
range from 1% to 7% on the top 15 GSP bilateral imports.
trading practices that restrict U.S. exports to and investment
U.S.-India trade negotiations reportedly have discussed
in India. Indian Prime Minister Modi’s first term fell short
potential reinstatement of India in GSP, which some
of many observers’ expectations, as India did not move
Members of Congress and U.S. businesses support.
forward with anticipated market-opening reforms, and
Services. The United States and India are competitive in
instead increased tariffs and trade restrictions. Modi’s
certain services industries. Barriers to U.S. firms’ market
strong electoral mandate may embolden the Indian
access include India’s limits on foreign ownership and local
government to press ahead with its reform agenda with
presence requirements. A key issue for India is U.S.
greater vigor. Recent slowing economic growth in India
temporary visa policies, which affect Indian nationals
raises concerns about India’s business environment.
working in the United States. India is challenging U.S. fees
Selected Issues
for worker visas in the WTO, and monitoring potential U.S.
action to revise the H-1B (specialized worker) visa
Tariffs. Bilateral tensions have increased over each side’s
program. India also continues to seek a “totalization
tariff policies. India has relatively high average tariff rates,
agreement” to coordinate social security protection for
especially in agriculture. It can raise its applied rates to
workers who split their careers between the two countries.
bound rates without violating its commitments under the
WTO, causing uncertainty for U.S. exporters. India’s tariff
Agriculture. Sanitary and phytosanitary (SPS) barriers in
hikes include raising tariffs on cell phones from 0%
India limit U.S. agricultural exports. The United States
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U.S.-India Trade Relations
questions the scientific and risk-based justifications of such
various dialogues. The government-to-government Trade
barriers. An ongoing issue is India’s purported compliance
Policy Forum (TPF) has not met regularly in recent years
with a WTO decision against its ban on U.S. poultry
amid growing trade frictions. The private sector-based CEO
imports and live swine due to avian influenza concerns; the
Forum also is an opportunity for bilateral engagement.
WTO held that India’s measures violated WTO SPS rules.
A U.S.-India Trade Deal?
Each side also sees the other’s agricultural support
The United States and India are holding negotiations to address
programs as market-distorting; India’s view of its programs
bilateral trade frictions. They reportedly are discussing a deal for
from a broad food security lens complicates matters.
U.S. reinstatement of GSP for India in exchange for certain
Intellectual Property (IP). The two sides differ on how to
market access commitments from India. Expectations did not
balance IP protection to incentivize innovation and support
materialize for a deal announcement in September 2019 during
other policy goals, such as access to medicines. India’s IP
Prime Minister Modi’s visit to the United States for the United
regime remains a top U.S. concern, and India remains on
Nations General Assembly. Earlier lack of progress reportedly
the “Special 301” Priority Watch List for 2018, based on
prompted the Administration to consider launching a Section 301
such concerns as its treatment of patents, infringement
investigation of India’s trade practices—the trade law under
rates, and protection of trade secrets.
whose authorities the Administration investigated certain trade
“Forced” Localization. The United States continues to
policies of China and imposed higher tariffs on trade with China.
press India to address its “forced” localization practices,
Regional Integration. India is party to negotiations on the
such as in-country data storage, domestic content, and
Regional Comprehensive Economic Partnership (RCEP)
domestic testing requirements—viewed by the United
with China and 15 other Asia-Pacific nations. Seven RCEP
States as presenting barriers to trade with India. Adding to
members (but not India) were among the 11 remaining
U.S. concerns are India’s new restrictive localization rules
parties to the proposed Trans-Pacific Partnership (TPP).
for certain financial data flows, which affect companies
After President Trump ceased U.S. participation in the TPP,
such as Visa and MasterCard. At the same time, India has
these 11 parties signed the new Comprehensive and
moved to ease some local sourcing rules for single-brand
Progressive Agreement on TPP (CPTPP), which became
retailers, which would affect companies such as Apple.
effective on December 30, 2018. Among other issues, India
Investment. India aims to attract foreign investment and
has long sought to join the Asia-Pacific Economic
has made FDI reforms, such as raising foreign equity caps
Cooperation (APEC) group of the United States, China, and
for insurance and defense, and other strides to improve its
19 other economies. The United States stated previously
business environment (World Bank, Doing Business
that it welcomes India in APEC. Some question if India is
Indicators). U.S. concerns about investment barriers remain
willing to make sufficient economic reforms to join APEC.
nevertheless, heightened by new Indian restrictions on how
WTO. The United States and India often have opposing
e-commerce platforms such as Amazon and Walmart-
stances in the WTO, whose future direction is unclear amid
owned Flipkart conduct business. From the U.S. view,
debate over institutional reforms and future negotiations.
India’s weak regulatory transparency and other issues, such
With India’s growing integration in the global economy,
as India’s IPR and localization policies (see above), add to
some policymakers have called on India, like China, to be a
concerns about FDI barriers. Two-way U.S.-Indian FDI is
more responsible stakeholder in the international rules-
linked to U.S. jobs and exports in a range of sectors, yet
based trading system. They blame India for impeding WTO
U.S. FDI in India prompts some offshoring concerns.
progress on certain issues, such as e-commerce customs
Defense Trade. The two nations have signed defense
duties and fisheries subsidies. India previously blocked the
contracts worth more than $15 billion since 2008, up from
Trade Facilitation Agreement (TFA), which ultimately
$500 million in all previous years combined. Major
entered into force in 2017, until a compromise was reached
anticipated sales include 24 MH-60 Seahawk multi-role
on treatment of certain food security programs. The United
naval helicopters and a potential commercial sale of AH-64
States and some developed countries have criticized India,
Apache attack helicopters. India is eager for more
China, and certain other countries for self-designating as
technology-sharing and co-production; some reports
developing countries to claim special and differential
indicate U.S. and Indian interest in producing F-16 combat
treatment under the WTO rules. India, China, and some of
aircraft there. The United States, meanwhile, urges more
these countries have pushed back on this criticism.
reforms in India’s defense offsets policy and higher FDI
Congressional Interest
caps in its defense sector. India’s pursuit of a multibillion-
dollar deal to purchase the Russian-made S-400 air defense
Questions on U.S.-India trade relations may include
system may trigger U.S. sanctions on India under the
What are prospects for a bilateral resolution to trade
Countering America’s Adversaries Through Sanctions Act
frictions? What role would GSP eligibility reinstatement play?
(P.L. 115-44).
Are multilateral or regional solutions possible?
Current Negotiations and Agreements
Given the Trump Administration’s focus on greater
reciprocity in U.S. trade relations, what are ways to
Bilateral Engagement. The United States and India trade
strengthen U.S.-Indian trade and investment ties? Is there
on WTO terms, as they do not have a bilateral FTA. In
potential for broader trade agreement negotiations?
2018, President Trump stated that India expressed interest
in negotiating an FTA. Some India watchers advocate for
Shayerah Ilias Akhtar, Specialist in International Trade
an FTA, while others question India’s willingness to open
and Finance
its markets. Past negotiations on a BIT are stalled due to
K. Alan Kronstadt, Specialist in South Asian Affairs
differences on approaches to investor protections. Over the
years, the two sides have engaged on trade issues through
IF10384
https://crsreports.congress.gov
U.S.-India Trade Relations
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https://crsreports.congress.gov | IF10384 · VERSION 11 · UPDATED