A new approach on investment

A new approach on investment

India U.S. trade agreement negotiations.


➢ India shedding its pre-1990 stance of non-alignment has moved decisively towards forging a better relationship with the USA. This is in line with the present global geopolitical atmosphere and India’s immediate needs.
➢ Contrary to expectations that were generated after the Houston rally of the Indian Prime Minister and US President, India, and the United States failed to arrive at a trade deal then.
➢ However, the first-ever trade agreement between India and the U.S. is expected during the U.S. president’s visit to India.


Significance of the deal


➢ Though the total value of the trade deal would not be comparable to other international trade deals, a U.S.-India trade deal will have historic significance.
➢ It is expected to usher in a period of strong collaboration between the two countries to advance a shared bilateral trade agenda and effectively resolve issues as they arise, instead of seeking a remedy from the WTO.
➢ The signing of the deal will allow the two sides to continue efforts to achieve incremental outcomes and possibly enable the start of negotiations on a comprehensive free trade agreement (FTA).

Outcome


There is tremendous potential in India-US trade relations. Bilateral trade between India and the US has almost touched $150 billion and there has been a growth every year in the last few years. Realizing the growth potential of this relation will need some give and take from both countries.


Incremental outcomes


➢ Given the possible roadblocks to a comprehensive free trade agreement (FTA), the two countries should look at incremental outcomes first. At a later stage, when the two countries are prepared to negotiate a more comprehensive bilateral FTA, they can take up more complex issues for discussions.
➢ India and the U.S. should focus on what is doable.
➢ The relatively easier-to-solve issues of intellectual property rights (IPR), digital trade, and investment should be prioritized.
➢ IPR has historically been an area of contention between the two countries, but discussions on IPR have progressed well in recent years and there is the need to build on the progress made.


Shared interests


➢ Given the shared interests between India and the U.S. in certain areas, the co-ordination and partnership in such areas can be mutually beneficial to both countries.
➢ Investment is an important segment for both economies. India invests in the U.S. and continues to seek U.S. investment in India. There is a need to encourage foreign direct investment (FDI).
➢ The two countries should negotiate an agreement on investment matters that can provide greater transparency, predictability, and regulatory certainty to investors from the other country.
➢ Given the Indian government and U.S. administration’s scepticism towards ‘BITs’ (bilateral investment treaties), there is the need to look for newer options.
➢ A U.S.-India investment agreement could focus on fair treatment for investors from the other country, regulatory transparency and predictability, and approaches for resolving concerns short of investor-state dispute settlements.
➢ Both India and the U.S. are still trying to deal with the issue of appropriate scope and approach of regulating electronic commerce issues in this digital age. Greater collaboration and sharing of each other’s experiences can help strengthen the relationship.


A new approach


➢ India and the U.S. could review their recent FTAs, to come up with a new approach.
➢ The recently concluded U.S.-Mexico-Canada Agreement contains a novel approach on investment, notably its abandonment of investor-state dispute settlement.
➢ The Regional Comprehensive Economic Partnership also does not include investor-state dispute settlement.

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