India is contemplating whether to join the trade pillar of the Indo-Pacific Economic Forum, but the United States is somewhat reluctant to allow New Delhi’s entry into this pillar, our correspondent has learned.
Washington, according to people familiar with the IPEF negotiations, seems rather wary of India’s entry into the trade pillar on alleged grounds that New Delhi could lower the overall level of ambition to suit its interests, particularly in the area of setting enhanced standards.
India is the only member of the IPEF that opted not to participate in the trade pillar. Apparently, Washington appears to have subtly made it known about its reluctance for admitting India into IPEF’s trade pillar, said people who asked not to be identified.
The joint statement issued by President Biden and Indian Prime Minister Modi after their meetings last week remained silent on the IPEF’s trade pillar. It says “The leaders reaffirmed that the Indo-Pacific Economic Framework (IPEF) is an. important pillar of our collective and collaborative efforts to build resilience in our supply chains, harness transformations in clean energy, and accelerate progress of our economies through anti-corruption efforts, efficient tax administrative practices, and capacity building measures.”
The joint statement says that “the leaders welcomed the substantial conclusion of negotiations on the proposed IPEF Supply Chain Agreement and committed to working with other partners expeditiously to conclude negotiations of the agreements under the clean economy and fair economy pillars to deliver concrete benefits that enhance the economic competitiveness and prosperity of countries in the Indo-Pacific. President Biden invited India to attend the APEC Summit in San Francisco in November 2023 as a guest of the host."
Since the beginning of the IPEF discussions more than two years ago with the active launch of negotiations in December last year, India chose to stay out of the negotiations on the trade pillar.
Part of the reason for India’s opting out of negotiations in the trade pillar is due to the exclusion of market access by the United States, which does not want to provide new market access to any IPEF member, said people who took part in the negotiations.
Also, due to the excessive focus on setting high standards, including labor and environment standards, India may have decided not to participate in the trade pillar negotiations.
However, either now or in the near future, India will need to address the question of whether it would be more beneficial to join the ongoing negotiations in the IPEF’s trade pillar so that it can actively negotiate the standards from the Indian priorities.
Whatever standards are finally negotiated and agreed upon in the IPEF’s trade pillar could prove to be beneficial for India if it wants to pursue a free trade agreement sometime in the near future, said an IPEF negotiator who preferred not to be identified.
According to the joint statement issued by the two leaders,“they also looked forward to reconvening the India-US Trade Policy Forum before the end of 2023 to further enhance the bilateral trade relationship by addressing trade concerns and identifying further areas for engagement.”
The IPEF comprises 14 countries – the United States, Australia, Brunei Darussalam, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam.
In paragraph 43 of the joint statement issued by the two leaders, there is a mention of the World Trade Organization and the partial termination of India’s benefits under the Generalized System of Preferences by the Trump Administration in 2019.
It says that the United States and India “have also taken steps toward deepening bilateral cooperation to strengthen our economic relationship, including trade ties.”
According to the joint statement, “India highlighted its interest in the restoration of its status under the US Generalized System of Preferences program, which could be considered in relation to eligibility criteria determined by the US Congress. The leaders supported intensifying the work to advance progress on issues related to the eligibility criteria.”
Given the Biden Administration’s prevailing stand against providing new market access to any country, Washington may seek reciprocal market access for its dairy products as well as a few other items in order to extend GSP access for Indian products worth $5.6 billion, said people familiar with the GSP discussions.
Significantly, as per the joint statement, “Prime Minister Modi also expressed India’s interest towards being recognized as a Trade Agreements Act-designated country by the United States to further enhance the integration of both economies and to further promote trade and investment between two countries.
In this regard, the leaders welcomed the initiation of discussions between both sides at an official level on issues related to bilateral government procurement.” This could entail huge market access for US financial and other entities in India’s government procurement tenders.
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