• Recently, the US Air force shot down a balloon claiming it to be a Chinese spying device.
• This incident has complicated an already strained US-China relationship.
• Several factors have tested their trade relationship in recent years, and these include disagreements over trade imbalances, intellectual property theft, and technology transfer.
• In this context, India should seize this opportunity to build better relations with US supply chain and logistics management. 

Concerning points between US and China

• In 2018, the US imposed tariffs on Chinese imports to reduce its trade deficit with China and address concerns over intellectual property theft.
• China responded with tariffs of its own, leading to the ongoing trade dispute.
• To reshape the existing global supply chains the US has passed two crucial legislations:
• The Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act and the Inflation Reduction Act, with a budget outlay of $280 billion and $370 billion, respectively.
• The CHIPS Act aims: “To build a domestic semiconductor industry and push forward America’s scientific supremacy over China”
• The Inflation Reduction Act aims: “ To reducing healthcare costs and encouraging clean and green energy transmission in a big way”
• Currently, India is also following this path through schemes like Production Linked Incentives (PLI). 

Current India-US Bilateral trade relations

• Even though India-US trade relations have strengthened post, many issues have stopped them from having a full-fledged trade agreement.
• The US is the largest import partner of India.
• According to the data of the commerce ministry, in 2021-22, the bilateral trade between the US and India stood at USD 119.42 billion as against USD 80.51 billion in 2020-21.
• Exports to the US increased to USD 76.11 billion in 2021-22 from USD 51.62 billion in previous fiscal year, while imports rose to USD 43.31 billion as compared to about USD 29 billion in 2020-21.
• America is one of the few countries with which India has a trade surplus.
• In 2021-22, India had a trade surplus of USD 32.8 billion with the US.
• While both nations are cautious about their current over-reliance on Chinese imports
• They have divergent views on agriculture, labour standards, climate, and human rights issues.
• These are reflected in the current Indo-Pacific Economic Framework for Prosperity (IPEF), which tries to build regional cooperation on trade, supply chains, clean energy , tax and anti-corruption.

Suggestions to improve India-US trade relations

As a first step, both nations could work on the following:

1. Reinstatement of India in the Generalised System of Preferences (GSPThe GSP was established by the US to provide preferential treatment to certain imports from developing countries.

• Under this programme, eligible products from developing countries, including India, were exempt from tariffs when imported into the US.
•  This made Indian exports to the US more competitive and helped increase trade between the two countries
• India was the largest beneficiary of the GSP system.
• In 2018, $6.8 billion worth of exports from India — nearly 10% of the country’s exports, that is benefited from GSP rules.
• In 2019, the US removed India from the GSP programme, citing concerns over trade practices and failure to provide equitable and reasonable market access to US companies.
• Reinstating India into the GSP programme will be a good way to enhance bi-lateral ties.

2. Start negotiating on services trade outside the framework of comprehensive free trade negotiations

• The US has been seeking greater access to the Indian education and insurance markets, while India has been pushing for more labour access in some US services.
• More than the merchandise segment, there are more complementarities between India and US in the services segment.
• To negotiate services trade agreements within a comprehensive free trade agreement (FTA) framework, considering the complementarity that services trade provides for both nations, a standalone services agreement could provide a quick opportunity for both countries to seal a deal.
• There are several low-hanging fruits, such as US investments in the state-of-the-art GIFT City and taking forward India’s fintech innovations like UPI, RuPay, etc., to the US, which can all be win-win measures, with least conflict.

3. Start intellectual-level exchange of ideas on labour and environmental standards.

• Labour and environmental standards have been a significant point of contention.
• While the US feels harmonising both the standards is essential for protecting global welfare, India’s practical inability restricts it from starting a discussion on this topic.
• India needs to understand that the developed world and some developing countries are moving in this direction.
• A striking example is the EU-Vietnam FTA that has shown a lot of benefits accruing to both trade partners.
• In the context of India’s ongoing negotiations engaged with the EU, the UK, Canada and Australia, standards are an important issue.
• The future of global trade will be divided among blocs, largely led by the US and China.
• There is likely to be free trade within a bloc and limited trade across blocs.

 The United States and India have a strong strategic partnership founded on shared values, commitment to a free and open Indo-Pacific region. Attempts by the US to re-establish supply chains with friendlier nations. India needs to reinstatement in the Generalised System of Preferences, start negotiating on services trade outside the framework of comprehensive free trade negotiations with US. India needs to understand that Labour and environmental standards have been a significant point of contention. India needs to start engaging experts and the research and academic community to brainstorm these standards with cross-country comparisons. Hence, showcasing quick results in negotiations becomes vital for both the US and India.