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The Promise of a Robust U.S.-India Trade Partnership

Innovation does not happen in a vacuum. The constant free flow of ideas and data across the globe fuels the development of the new chip that powers our smartphones and the apps we use to learn, play, and connect with loved ones.

But to ensure these advancements and technological breakthroughs not only continue but thrive, nations must embrace an environment of cross-border cooperation and competitiveness. And few trading relationships hold as much promise as the partnership between the United States and India.

The United States and India are positioned to gain more than all other markets from a significant reduction in global barriers to services trade, according to a study recently cited by the World Trade Organization. Further, the strengths of India and the United States’ tech sectors are complementary and allow both countries to innovate and excel.

The Indian information communications technology (ICT) sector employs around 3.5 million workers and contributed 9.5 percent to Indian GDP in 2014. India is the second-largest exporter of IT services and now has over 550 million internet connections and over 500 million smart phone users, making it the fastest growing telecom market in the world. In addition, India has a vibrant startup ecosystem, which is growing at a rate of 12-15 percent annually and added 1,200 new startups in 2018.

Similarly, the tech sector is essential to U.S. innovation, job creation, and economic growth. Technology companies account for 10.2 percent of the U.S. economy and 7.6 percent of the U.S. workforce, with application of technology products and services spanning all sectors. Every day, U.S. companies work with partners and research hubs in cities around the world to create and bring to market new products and services that drive commerce and support jobs in the United States.

By leveraging these strengths through international cooperation, both nations can pursue a meaningful digital future together.

However, current policies in India challenge that growing relationship. Even where well-intentioned, Indian government measures may inadvertently cut off Indian companies from collaborating with and benefiting from U.S. partners. High tariffs, coupled with regulatory barriers, limit companies from importing products and components that drive local business and innovation. Potential digital barriers, such as restrictions on the movement of data and data localization requirements, would compound investment uncertainty.

The ongoing U.S.-India trade talks provide an important opportunity for both countries to find solutions to long-standing technology trade issues, thus encouraging a robust, integrated, and mutually beneficial trade relationship. As negotiators work toward a trade package, there are two essential issues to raise, which would elevate the promise of the bilateral innovation partnership.

First, India’s import barriers must be eased. ICT products are a key enabler of technology adoption and utilization, and an essential element of India’s development as a tech leader. Reducing burdensome testing and conformity assessment programs and high tariffs on ICT products would not only facilitate U.S. sales, but would also allow India to buy the best equipment at the lowest cost. Additionally, breaking down these barriers would support job growth in both the U.S. and India, and push India further up the World Bank’s Ease of Doing Business Index, a key objective of the Indian government. This would be a win-win for both countries.

Second, the United States and India must create a concrete and continuing dialogue to discuss digital issues. The Indian government is considering a range of new policies, including a potential data protection law with restrictive elements and a broad framework for data governance. These are valid issues to consider, and India is asking many good questions about how data should be handled to ensure that the economic benefits can be realized by all, including through finding ways for the government to access data across borders to enforce the law and protect national security. However, if data policies in both countries diverge so significantly that companies are unable to operate across borders, this will stifle innovation and economic benefits on both sides. A standing dialogue would provide a regular forum to discuss and inform digital strategies and help both sides avoid unintended consequences of new policies.

The value of increased U.S.-India trade is clear. Already, greater Indian openness to trade has led to economic growth and higher rates of economic inclusivity and educational attainment. The path to greater innovation starts with clearing existing roadblocks and ensuring that new ones do not emerge. ITI hopes that both governments capitalize on the important opportunity of bilateral trade talks to address key digital issues and help the U.S.-India trade relationship reach its full potential.

Public Policy Tags: Trade & Investment