Indo-US trade

Indo-US trade

Context:

The US surpassed China to become India’s top trading partner in 2021-22, reflecting strengthening economic ties between the two countries

• Exports to the US increased to $76.11 billion in 2021-22 from $51.62 billion in the previous fiscal year
• Imports rose to $43.31 billion as compared to about $29 billion in 2020-21.

Concept: 

Bilateral trade trends:

• In 2019-20, the bilateral trade between the USA and India stood at USD 88.75 billion.
• The USA is one of the few countries with which India has a trade surplus.
• India’s trade surplus with the USA increased to USD 17.42 billion in 2019-20 from USD 16.86 billion in 2018-19.
• For the USA, India was the sixth largest supplier of services imports.
• Generalised System of Preferences (GSP) Programme-Effective from June 2019, the USA decided to withdraw duty-free benefits to Indian exporters under the GSP programme.
• India and the United States signed various foundational agreements including the Basic Exchange and Cooperation Agreement – BECA.

Generalized System of Preferences (GSP):

It is an umbrella that comprises the bulk of preferential schemes granted by industrialized nations to developing countries. It involves reduced Most Favored Nations (MFN) Tariffs or duty-free entry of eligible products exported by beneficiary countries to the markets of donor countries.

The GSP was adopted at UNCTAD in New Delhi in 1968 and was instituted in 1971.

There are currently 13 national GSP schemes notified to the UNCTAD secretariat.

UNCTAD. The 13 countries that provide GSP preferences to emerging and developing countries are:

• Australia
• Belarus
• Canada
• European Union
• Iceland
• Japan
• Kazakhstan
• New Zealand
• Norway
• Russia
• Switzerland
• Turkey
• USA

The motive behind granting GSPs is to help developing countries and particularly least developed countries (LDCs) to promote productive capacity development and to encourage trade and investment.

Foundational agreements:

India and the United States signed the Basic Exchange and Cooperation Agreement (BECA), which, along with the two agreements signed earlier — the Logistics Exchange Memorandum of Agreement (LEMOA) and the Communications Compatibility and Security Agreement (COMCASA) — forms the “foundational pacts” for deep military cooperation between the two countries.

1. Basic Exchange and Cooperation Agreement (BECA)?

BECA will help India get real-time access to American geospatial intelligence that will enhance the accuracy of automated systems and weapons like missiles and armed drones.

Through the sharing of information on maps and satellite images, it will help India access topographical and aeronautical data, and advanced products that will aid in navigation and targeting.

BECA will provide Indian military systems with a high-quality GPS to navigate missiles with real-time intelligence to precisely target the adversary.

2. Logistics Exchange Memorandum of Agreement (LEMOA) ?

LEMOA was the first of the three pacts to be signed in August 2016.

LEMOA allows the militaries of the US and India to replenish from each other’s bases, and access supplies, spare parts and services from each other’s land facilities, air bases, and ports, which can then be reimbursed.

The signing of LEMOA was in itself an affirmation of the mutual trust between the two militaries, and its application will enhance the trust.

3. Communications Compatibility and Security Agreement (COMCASA)?

COMCASA was signed in September 2018, after the first 2+2 dialogue during which then External Affairs Minister Sushma Swaraj and then Defence Minister Nirmala Sitharaman met the visiting Secretary of State Michael R Pompeo and then Secretary of Defence James N Mattis.

The pact allows the US to provide India with its encrypted communications equipment and systems so that Indian and US military commanders, and the aircraft and ships of the two countries, can communicate through secure networks during times of both peace and war.

The signing of COMCASA paved the way for the transfer of communication security equipment from the US to India to facilitate “interoperability” between their forces — and potentially with other militaries that use US-origin systems for secure data links.