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U.S.-India Economic Relationship Summary

Core Content

This document, titled "U.S.-India Insight", Vol. 2, Issue 11, November 2012, discusses the need to reignite and strengthen the U.S.-India economic relationship under the second term of President Barack Obama. It emphasizes the strategic importance of India in the U.S. "rebalancing" strategy and the necessity of a new framework for economic cooperation to ensure mutual growth and competitiveness in the 21st century.

Main Points

• Strategic Importance of India:
  India is the world's second-most populous country and on track to become the third-largest economy. Its economic potential is crucial for the U.S. to maintain its global leadership and competitiveness.

• Current Economic Ties:
  Bilateral trade reached $86 billion in 2011 and was expected to exceed $100 billion in 2012. However, the U.S. share of India's trade and investment is declining as other countries, such as Canada, Japan, and South Korea, advance their economic engagement with India.

• Need for a New Framework:
  A 10-year "New Framework for U.S.-India Economic Cooperation" should be established to guide the deepening of economic ties. This framework would mirror the 2005 "New Framework for the U.S.-India Defense Relationship", serving as a strategic guide for negotiations and cooperation.

• Key Components of the Framework:

  • Completing a High-Standard Bilateral Investment Treaty (BIT):
    A BIT would provide strong protections for investors, including market access commitments and an investor-state dispute settlement mechanism.
  • Prioritizing the Infrastructure Debt Fund:
    This fund, initially proposed by the U.S.-India CEO Forum, aims to finance India's $1 trillion infrastructure investment plan.
  • Moving Ahead with Sectoral Agreements:
    The U.S. and India should focus on specific sectors where liberalization can yield immediate benefits, such as IT services, chemicals, energy, and education.

• Immigration and Talent Mobility:
  The U.S. is losing high-skilled Indian entrepreneurs due to outdated immigration policies. Indian immigrants contribute significantly to the U.S. economy, especially in STEM fields, and possess a high level of education and income. A "start-up visa" and improved movement of professionals are proposed to enhance U.S. competitiveness.

• Regulatory Reforms:
  The U.S. should collaborate with India on regulatory reforms that promote transparency, combat corruption, and create a more favorable business environment. This could be modeled after the U.S.-Japan Economic Harmonization Initiative (EHI), focusing on "behind-the-border" issues.

• Vision for the Future:
  The document calls for a "full embrace of India" as a strategic partner, emphasizing the need for vision and steady commitment to maintain and expand the U.S.-India partnership. It suggests that achieving $500 billion in annual bilateral trade by 2020 could be a stepping stone toward a comprehensive free trade agreement.

Key Information

• India's Economic Role:
  India is a critical player in the global economy and a key partner for the U.S. in the Asia-Pacific region.

• Immigration Challenges:
  The U.S. immigration system is seen as outdated and in need of reform, particularly in facilitating the entry of high-skilled professionals and entrepreneurs.

• Proposed Solutions:

  • A new 10-year economic framework.
  • Completion of a high-standard BIT.
  • Infrastructure Debt Fund collaboration.
  • Sectoral liberalization efforts.
  • Regulatory reforms to enhance transparency and reduce corruption.
  • Improved mobility of professionals and entrepreneurs.

• Call to Action:
  The U.S. must act decisively to prevent ceding ground to other trading partners and to realize the full potential of a defining economic partnership with India.

Conclusion

The document underscores the importance of coordinated and ambitious economic cooperation between the U.S. and India. It advocates for a comprehensive strategy that includes policy reforms, regulatory alignment, and enhanced trade and investment relations. By doing so, both nations can leverage their strengths and solidify their partnership for long-term mutual benefit.