Turning trade winds to power India's path

A trade deal with the US could supplement India's efforts to position itself as a 'China Plus One' investment destination. Addressing market access through tariff and non-tariff barriers should help plug India into the global supply chains of US companies. India has considerable scope to lower its average tariffs on US exports; it can use this as a lever to divert US investment into the country. Teslas and Harley-Davidsons headed for the Indian market will, in any case, be made in Asia. Some of these economies have low reciprocal tariffs with India. At similar tariff levels, goods manufactured in the US will not be able to compete with those manufactured offshore. Indian trade negotiators will calibrate market access against potential inbound investment.

Agriculture is a more sensitive issue for India, and it will be justified in seeking safeguards for its rainfall-dependent output. Favourable terms for US farm produce exports can be structured in a controlled environment that does not make India's food security or farmer incomes more volatile. Besides, India will defend its price and income interventions in agriculture against the much larger subsidies the US provides to its farm sector. Any agreement, such as over poultry or dairy, will have to be accretive to India's nutritional security, or it will run into political opposition. Indian farm exports will likewise be constrained by its water deficiency.

The scope to expand bilateral services trade is most promising and plays into the symbiotic nature of the two economies in tech development. Silicon Valley's dependence on Indian software engineers is growing. Outsourcing is not central to US efforts to rebalance trade, despite the Trump administration's sensitivity to immigration. India has softened its stance on data exports as it positions itself as a key global node for data processing. It can expect a more considerate US position on technology transfer if services engagement is improved. India should negotiate a larger US footprint in domestic technology hardware development.