Expanding US trade with India will face market barriers, underdeveloped conditions

By Wang Jiamei Source:Global Times Published: 2017/11/1 21:33:39

US President Donald Trump is reportedly scheduled to meet Indian Prime Minister Narendra Modi ahead of the East Asia Summit in Manila, although the former will skip India during his November 3-14 Asia tour. Initiatives to improve connectivity in the Asia-Pacific region will be one of the key topics during the Trump-Modi meeting, according to a report from the Hindustan Times on Sunday.

The meeting comes not long after US Secretary of State Rex Tillerson's visit to India, during which he signaled that the two countries should strengthen ties to counter China's growing influence in Asia. It seems that the Trump administration is eager to woo India, given their common ground on issues such as fighting terrorism and geopolitical conditions in the Asia-Pacific region.

While a deepening strategic partnership has obviously created a favorable environment for the development of economic and trade relations, factors hindering US-India economic cooperation should not be ignored. Although US-India merchandise trade has grown remarkably over the past few years, it was still worth just $67.7 billion in 2016, accounting for less than 2 percent of the $3.7 trillion US merchandise trade during the year.

The huge asymmetry in economic power may partly explain the limited trade volume. India's underdeveloped economic and industrial conditions and market barriers are also to blame for curbing foreign trade, not just with the US. During the US-India bilateral Trade Policy Forum last week, the US delegation led by US Trade Representative Robert Lighthizer pressed India on key issues like market access and lifting of trade barriers.

In comparison, despite frequent friction, bilateral merchandise trade between China and the US was $519.6 billion in 2016, with China being the largest trade partner of the US. According to data discussed by former commerce minister Gao Hucheng at a press conference in February, China is the destination for 26 percent of US exports of Boeing aircraft, 56 percent of US soybeans, 16 percent of its automobiles, 15 percent of its farm products and 15 percent of its integrated circuits.

While the gap between US-China trade and US-India trade is huge, it is undeniable that the potential of the latter is great considering that India is now the world's fastest-growing economy and many US companies have showed strong interest in the market. US-India economic and trade relations are bound to grow closer, but there will be bumps on the road given the restricting factors and uncertainties surrounding India's ongoing domestic reforms.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn

Posted in: EYE ON THE ECONOMY

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