India’s large population and developing economy make it an attractive export market for the United States. The total value of U.S. exports of goods and services to India was $58.6 billion in 2019. U.S. agricultural exports to India totaled $1.8 billion in 2019 and India is the 14th largest agricultural export market for the U.S.
While India presents significant market opportunity, tariffs and nontariff barriers such as sanitary and phytosanitary (SPS) requirements create unique challenges to market access and development. Prospects for U.S. agricultural exports to India were further complicated when India targeted certain U.S. products for retaliatory tariffs in response to U.S. tariffs on steel and aluminum imports in 2018. India levied the tariffs in 2019 following the U.S. revoking preferential treatment for India under the Generalized System of Preferences (GSP) due to concerns with India’s adherence to market access criterion.
Beginning in the fall of 2019 and through 2020, the United States and India engaged in market access negotiations. U.S. objectives focused on non-tariff barriers as well as targeted reduction of tariffs. It is uncertain what priority bilateral trade will be for the Biden administration. Last month, India’s Commerce Minister Piyush Goyal said he will re-engage in trade talks with the new U.S. administration. During her Senate confirmation hearing, U.S. Trade Representative Katherine Tai committed to engaging with Congress on the India GSP issue and market access.
Tariffs and India’s GSP status will likely continue to play a central role in further U.S.- India trade talks. It is probable that in any future agreements, the U.S. will consider restoring, at least partially, India’s eligibility under GSP to provide greater access for U.S. agricultural products.
Both India and the U.S. are absent from not only the Regional Comprehensive Economic Partnership (RCEP), but also the Comprehensive and Progressive Agreement for TPP (CPTPP) signed in December 2018. It is unknown if the U.S. and India will renegotiate re-entry into these regional trade agreements or find other routes to engagement in multilateral trade. India attempted to join the Asia-Pacific Economic Cooperation (APEC) but did not fulfill the requisite economic reforms.
Although U.S. exports of some agricultural products have been negatively impacted by the retaliatory tariffs, overall U.S. exports of high-value food products to India have been increasing in recent years. Urbanization and rising income among a large segment of the growing Indian population is resulting in increased demand for high-value food products. Consumer demand for health-oriented foods is rising, particularly among the young and growing middle class. With more than 65% of the population being 35 years old or younger, India represents significant market growth potential for diverse and premium foods. Successful broader U.S. trade agreement negotiations with India could further benefit not only agricultural exports but also provide a foundation for premium food sector success in the long-term.