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American Business Welcomes Pact With India

A P Kamath

The United States announced on January 10 that it had reached a trade agreement with India to eliminate 1,400 barriers in agriculture, textiles and other key sectors, including a wide range of consumer goods and manufactured products. The wrangling over the restrictions has been going on for more than four years.

"This important achievement," said the chairman of the US-India Business Council Chairman Dean R O'Hare, "confirms that a new spirit of pragmatism has taken hold in New Delhi.

"Changes in trade policy are among the most sensitive issues any government has to deal with, and this is especially true in vibrant democracies like India's," he said.

"According to the World Bank, India has the world's fourth largest economy in purchasing power parity," O'Hare said, adding, "But India's share of world trade only amounts to seven-tenths of one per cent.

"India's trading partners and investors can only welcome the decision to remove the most burdensome trade restrictions, which raise costs to Indian consumers, producers, and exporters and act as a continuous brake on the country's efforts to accelerate the pace of economic growth," he said.

In Washington, American officials pointed out the agreement was a sign of warming trade relations with India, America's 33rd largest export market. The US imported from India material worth $ 8.2 billion in 1998, topping American exports of $ 3.6 billion.

Officials also noted that half of India's restrictions will be lifted within three months; the rest by April 1 next year.

"Eliminating these restrictions will provide -- for the first time in 50 years for some products -- market access opportunities for US producers in key sectors... At the same time, it will stimulate investment, competition, and economic activity in India,'' said United States Trade Representative Charlene Barshefsky.

"The elimination of this regime of import restrictions will stimulate entrepreneurial activity in the Indian private sector that began with the reforms earlier this decade.''

The announcement surprised many people since tensions between India and America had increased during World Trade Organization talks in Seattle last month. The meeting ended in deadlock and the two countries clashed again when America proposed an initiative to improve labor standards. India also took a sympathetic view of a proposal by Japan to review US anti-dumping laws that allegedly protect American steelmakers and other cash-strapped industries.

New Delhi and Washington accepted this agreement, negotiated by Deputy US Trade Representative Ambassador Susan Esserman, late December.

India had claimed that GATT's balance of payments provisions allowed for restrictive import regimes. The United States challenged India's claim before a WTO panel. On April 6, 1999, the panel ruled that India's balance of payments situation did not justify these restrictions.

Among other things, the panel report noted that during India's 1997 consultation with the WTO Balance of Payments Committee, the International Monetary Fund stated that India no longer had a balance of payments problem that justified these restrictions.

India appealed to the WTO Appellate Body. But, on August 23, the Appellate Body rejected the appeal.

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