Chris Sevcik, Director of International Trade Services, WTCGP
The US and India are working towards a bilateral free trade agreement that is meant to ensure both parties benefit and targeted industries expand. A trade pact, described as a “mini-deal,” could come as soon as President Trump’s next visit to New Delhi scheduled in the coming weeks. This could restore India’s preferential trade status and ease US concerns with India’s trade and economic practices.
American companies are looking at expanding their operations in India, and 200 companies have expressed their interest to move from China to India. As supply chains continue to shift, a US-India free trade agreement can help companies in both countries expand their partnerships and grow.
Forty products imported from the US into India have been identified including pistachios, walnuts and apples for duty concessions so far. Medical devices, steel and aluminum are still under negotiation. The mini-deal will likely not include a decrease in trade tariffs. Reductions should be addressed in subsequent negotiations to ensure companies in both countries are able to have better market access for their products.
While both parties are aligned in their ambitions to develop a free trade agreement, tech policy is an issue that could be a potential deal breaker. There are currently three main hurdles that could cause issue: India’s Personal Data Protection Bill, India’s E-Commerce policy and their Intermediary guidelines.
India’s Personal Data Protection Bill was formally approved on December 4th by the Cabinet. If passed, the bill could impose strict data localization measures and establish a new Data Protection Authority to enforce compliance requirements with monetary penalties for those companies found to be uncompliant. Should this bill be passed, it may cause potential issues for international companies and potentially cause the US-India Free Trade Agreement to derail.
India’s E-commerce policy is being revisited by the Ministry of Commerce and Industry. The new policy could require the disclosure of source code and introduce broad restrictions limiting pricing strategies of multinationals. The MOCI has suggested that these new policies could be completed by mid-2020. If this policy is enacted, US companies would have to hand over their source code, a potential deal breaker for a U.S. India Trade Agreement.
India’s intermediary guidelines are about to be updated. This update will impact social media firms including Facebook. The updates are currently under review but are expected to include a mandatory traceability requirement. This requirement, if enacted, would force companies to break end-to-end encryption and create backdoors into their code. India claims that traceability is needed to ensure the safety of its citizens; however, privacy advocates are worried that the government could track down critics and impact free speech.
Many companies, government officials and individual citizens see a US-India Free Trade agreement as a benefit to both India and the US; however, there are still several hurdles that must be cleared before it can take effect.