This year has been fertile ground for establishing trade agreements - and has raised hopes that the US and India could conclude a bilateral deal. Most of the activity has been focused on Asia - either regional or bilateral. However two big players have been absent from the field. Both the U.S. and India have not jumped on board the major regional deals. Nor have they been active in establishing bilateral agreements. Whereas previously the announcement of a new trade pact was an ‘all aboard’ for any nation invited to join, in recent years governments are starting to weigh the pros and cons more carefully. The U.S. pulled out of TPP when both Donald Trump and Hilary Clinton felt that deal put the U.S. at a disadvantage. Likewise, Prime Minister Narendra Modi <a href="https://insidefashionlive.net/why-india-said-no-to-rcep/" target="_blank" rel="noopener noreferrer">withdrew India from RCEP</a>, partly on the grounds that it provided little benefit to Indian exporters and could potentially flood the country with low cost imports. <h3><strong>US-India Trade Deal Could Be an Apparel Game Changer</strong></h3> Earlier this year Mr. Modi and Mr. Trump met in what many hoped would be the <a href="https://insidefashionlive.net/us-india-eye-micro-trade-deal/" target="_blank" rel="noopener noreferrer">initial steps towards a free trade agreement</a> between the two nations. Previously, the Trump administration had withdrawn India’s GSP status on claims of unfair trade. China used to be India’s biggest trading partner, however since 2018-19 the U.S. has been the nation’s top partner. Trade between the two nations continued to grow in 2019-20. A deal could be particularly impactful on garment exports. Right now, the U.S. is India’s largest export market for readymade garments, accounting for 40% of the nation’s exports. Indian garment exporters' biggest competitor is Vietnam. As production diversifies out of China most of it is heading to Vietnam where efficiencies are continuing to improve. In many cases, Chinese manufacturers are simply opening up facilities in Vietnam and taking their customers with them. Nonetheless, the push to diversify sourcing doesn’t mean simply moving from China to Vietnam. It means spreading production into multiple countries to balance a range of risk factors. An FTA between India and the U.S. would give India a big competitive advantage over Vietnam. Already the U.S. is taking a harsher look at Vietnam’s surging exports and has hinted at implementing some sort of trade restraints. Maybe tariffs, but there are other options. There’s also China’s continued rise to power in both the region and the world. Something will by and large remain unchecked unless the U.S. takes a more proactive role in the region. This is something that President-elect Joe Bidden mentioned during his campaign. <b>KEY FACTS & COMMENTARY</b> <ul> <li>In March 2020, President Trump met with Prime Minister Modi and despite hints of a potential trade deal, they failed to produce a trade agreement. </li> <li>Even talks of a ‘mini deal’ fell through as India’s domestic industries, in particular agriculture, worried about being over run by foreign imports.</li> <li>Negotiators are typically caught between satisfying the criteria of the trade deal and meeting the demands of their domestic businesses.</li> <li>Short term goal for India: Restore GSP status and forge a ‘mini-deal’ with the U.S. (<a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/restoration-of-indias-gsp-status-a-small-indo-us-trade-deal-to-send-very-strong-signal-mukesh-aghi-usispf/articleshow/79145211.cms">Economic Times</a>)</li> <li>Lame duck presidents (the months before a president exits office) are notorious for the propensity of outgoing administrations to rush through executive actions to finalize their legacies. For example, President George H.W. Bush signed the North American Free Trade Agreement in December 1992. (<a href="https://www.atlanticcouncil.org/blogs/new-atlanticist/the-trump-administration-can-still-seal-a-trade-deal-with-india-and-cement-a-legacy/">The Atlantic Council</a>)</li> <li>Efforts to conclude a US-India trade agreement are about as far along as such negotiations can be before final compromises are reached, and it would be a substantial achievement for both countries. (Atlantic Council)</li> <li>“India still has many tariff and non-tariff barriers that irk Americans – even the Obama administration tried to nudge India on this. Biden will be familiar with these issues and will continue working on them, just not out in the open or as vocally as Trump was”, Kashish Parpiani, a research fellow at Mumbai-based Observer Research Foundation told <a href="https://www.aljazeera.com/economy/2020/11/23/a-better-bromance-india-could-benefit-more-from-biden-than-trump">Al Jazeera</a>.</li> <li>While trade negotiations will continue, a US-India bilateral free trade deal is not likely to be an immediate priority for a Biden White House, given the immense economic challenges the US faces at home. At the top of the list is record high levels of unemployment.</li> <li>“We may see the Biden administration renegotiating the Trans-Pacific Partnership [TPP) to include India,” according to Amitendu Palit, senior research fellow at the Institute of South Asian Studies, National University of Singapore. (<a href="https://www.aljazeera.com/economy/2020/11/23/a-better-bromance-india-could-benefit-more-from-biden-than-trump">Al Jazeera</a>)</li> <li>Mr. Palit believes the CPTPP could be re-positioned as an anti-China economic alliance across the Indo-Pacific, pointing out that RCEP is seen as a China-driven Free Trade Agreement.</li> <li>India’s Commerce and Industry Minister Piyush Goyal in September said most issues preventing a limited trade deal between India and the United States have been resolved and an agreement could be signed anytime the political situation in the US allows it. (<a href="https://economictimes.indiatimes.com/topic/Piyush-Goyal">Economic Times</a>)</li> </ul>