US policy wise : Visa, Free Trade and WTO
Project PRAYAS to help Indian youth migrate abroad
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Project PRAYAS
Mains level: Read the attached story
Central Idea
- The International Organisation for Migration (IOM) introduced Project PRAYAS (Promoting Regular & Assisted Migration for Youth and Skilled Professionals) to facilitate secure and regular migration for Indian workers and students.
What is Project PRAYAS?
| Details | |
| Project Name | Project PRAYAS |
| Introduced By | International Organization for Migration (IOM) |
| Partnership | Ministry of External Affairs, India |
| Objective | To facilitate secure and regular migration for Indian workers and students |
| Key Focus | Enhancing coordination between state and central governments
Addressing India’s growing role in international migration Providing policy recommendations for migration governance |
| IOM’s Role | Promoting humane and orderly migration as a United Nations agency |
| Significance | Represents a consolidation of state-level efforts for well-managed international migration |
| Focus Areas and Activities | Conducting comprehensive studies on migration trends
Launching awareness programs for safe and orderly migration processes |
Back2Basics: International Organisation for Migration (IOM)
| Details | |
| Establishment | 1951 |
| Initial Purpose | To assist in the resettlement of people displaced by World War II |
| Current Role | Providing services and advice on migration to governments and migrants, including various displaced persons |
| Type | Intergovernmental Organization |
| Membership | 173 member states, 8 observer states |
| Headquarters | Geneva, Switzerland |
| Key Objectives | Promote humane and orderly migration Emergency response
Link migration with development Health and support for migrants Facilitate managed labor migration Counter human trafficking |
| UN Relationship | Became a related organization of the United Nations in 2016 |
| India and IOM | India has been a member of IOM since 1992. |
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US policy wise : Visa, Free Trade and WTO
Is the emerging global order bipolar?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: na
Mains level: current world order's uneven power distribution
Central idea
The world order is shifting, with the U.S. leading but China rising fast. India needs to navigate complex relations, address internal challenges, and focus on economic and military growth for a strong role globally. Amid global conflicts, balancing alliances is crucial for India’s position in the evolving geopolitical landscape.
Key Highlights:
- Global Order Dynamics: Shifting landscape with China’s rise, Russian challenges, and the emergence of middle powers like India.
- Asymmetric Bipolarity: Viewing the world order as asymmetric bipolarity, where the U.S. remains pre-eminent but China rapidly advances.
- China’s Impact: Unprecedented economic and military growth redefines international power dynamics.
Key Challenges:
- Russia-China Nexus: The war in Ukraine strengthens Russia-China ties, posing strategic challenges for India.
- Global Security Complexities: Conflicts in Eastern Europe and West Asia contribute to a multifaceted global security landscape.
- Diplomatic Maneuvering: Navigating complex relations with the U.S., China, and Russia amid evolving global power dynamics.
Key Terms and Phrases:
- Asymmetric Bipolarity: Understanding the dynamics of uneven power distribution in the current world order.
- People’s Power: The 21st century characterized by unprecedented connectivity, interactions, and global integration.
- Military-Industrial Complex: The influence of industries producing destructive weapons on global violence.
- Two-Front Dilemma: China’s strategic challenge, facing pressures in the Western Pacific and the Line of Actual Control.
| Key Quotes and Anecdotes for extra marks:
“The present world order is in a state of flux, with asymmetric bipolarity as a defining feature.” “China’s GDP growth from $300 billion in 1990 to $19.3 trillion today is a historic shift in global power dynamics.” “India must acknowledge China as a long-term competitor, addressing power asymmetry through comprehensive national growth.” “Global violence is fueled by the military-industrial complex spreading instruments of death and destruction.” |
Key Statements and Examples:
- Russia’s Pivot: Economic sanctions and the Ukraine conflict drive Russia towards closer ties with China.
- India’s Diplomatic Complexities: Balancing trade ties with China and managing strategic challenges with the U.S. and Russia.
- China’s Economic Surge: Unprecedented GDP growth influencing global power dynamics and necessitating India’s strategic response.
Key Facts and Data:
- China’s GDP Growth: A remarkable shift from $300 billion to $19.3 trillion in the last four decades.
- India-China Trade: Standing at $138 billion, showcasing the intricate nature of bilateral relations.
- War in Ukraine: Ongoing for the past 20 months, contributing to evolving geopolitical dynamics.
Critical Analysis:
- Recognition of Asymmetric Bipolarity: Acknowledging and adapting to the current world order’s uneven power distribution.
- Comprehensive National Growth: Emphasizing India’s need to strengthen its comprehensive national power amid power asymmetry with China.
- Global Relations Management: Recognizing and addressing challenges in India’s diplomatic strategy amidst evolving global dynamics.
Way Forward:
- Internal Strengthening: Addressing internal fault lines, fostering societal cohesiveness, and focusing on comprehensive national growth.
- Strategic External Balancing: Balancing relations with the U.S. to maintain China’s two-front dilemma and preserving India’s strategic autonomy.
- Advocacy for Global Disarmament: Addressing the root issue of the military-industrial complex, promoting global disarmament for a more peaceful world.
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US policy wise : Visa, Free Trade and WTO
Reforming H-1B Visa Program: Vivek Ramaswamy’s Pledge
Note4Students
From UPSC perspective, the following things are important :
Prelims level: H1B Visa
Mains level: Read the attached story
Central Idea
- Indian-American Republican presidential contender Vivek Ramaswamy vows to overhaul the H-1B visa program.
- The H-1B visa, highly sought-after among Indian IT professionals, permits US companies to employ foreign workers for specialized roles requiring theoretical or technical expertise.
Why discuss this?
- The H-1B visa are highly sought-after category used by Indian professionals in the US as many use them as a precursor for permanent residency.
- However, the waiting periods for the employment-based green card for Indians can stretch into decades.
- The US embassy in India has already processed over 9 lakh non-immigrant visa currently and is expected to pass the one million mark soon.
Understanding H-1B Visa Program
- The H-1B visa program is crafted to facilitate the entry of skilled foreign workers into the United States, enabling them to work for American companies.
- It is particularly sought after by Indian IT professionals as it permits U.S. companies to employ foreign workers in specialized roles demanding theoretical or technical expertise.
- Despite its popularity, the H-1B visa program faces criticisms for extended waiting periods and the use of a lottery system for selection.
Ramaswamy’s Perspective
- Personal Experience: Ramaswamy acknowledged his own immigrant experience and contended that the H-1B system is detrimental to all parties involved.
- Merit-Based Reform: He advocated for replacing the lottery system with a meritocratic admission process, describing the current system as a form of indentured servitude that primarily benefits sponsoring companies.
- Eliminating Chain Migration: He also emphasized the need to eliminate chain-based migration, arguing that family members who join immigrants are not merit-based contributors to the country.
Historical Context and Comparisons
- Resonance with Trump: Ramaswamy’s stance on H-1B visas draws parallels with Donald Trump’s 2016 campaign.
- Hard stance: Despite hiring foreign workers under H-1B visas for his businesses, Trump initially adopted a hardline stance on these workers before later softening his rhetoric.
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US policy wise : Visa, Free Trade and WTO
US-UK forge ‘Atlantic Declaration’ to boost ties
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Atlantic Declaration
Mains level: Not Much
Central Idea
- The US and Britain have announced a new strategic pact called, reaffirming their “special relationship” to address challenges posed by Russia, China, and economic instability.
- They signed Atlantic Declaration to develop a new green economy through extensive industrial subsidies instead of pursuing a post-Brexit free-trade agreement.
What is Atlantic Declaration?
- The “Atlantic Declaration” aims to enhance industry collaboration in defense and renewable energy sectors in response to China’s growing competition.
- The declaration recognizes the challenges posed by authoritarian states, disruptive technologies, non-state actors, and transnational issues like climate change.
- Both leaders affirmed the strength of the transatlantic relationship and emphasized the need to adapt to the changing world economy driven by AI and technological advancements.
Key terms of the declaration
- Supply Chain Strengthening: The US and UK will strengthen their supply chains, invest in each other’s industries, and develop future technologies under the Atlantic Declaration.
- Clean Energy Partnership: They agreed to launch a civil nuclear partnership, aiming to promote clean energy cooperation and reduce reliance on Russian fuel.
- Technology and Critical Minerals: The countries will collaborate on the safe development of AI technology, negotiate a critical minerals agreement, and cooperate on telecoms technology and quantum technologies.
- UK-US “Data Bridge”: The declaration includes a commitment in principle to a UK-US “data bridge” that facilitates the transfer of data between British and US businesses without unnecessary bureaucracy.
- Critical Minerals Agreement: Negotiations on a critical minerals agreement will allow certain UK firms to access tax credits available under the US Inflation Reduction Act.
- Business Collaboration: Cooperation will extend to telecoms technology, including 5G and 6G, as well as quantum technologies, fostering collaboration and innovation between the US and UK.
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US policy wise : Visa, Free Trade and WTO
Lay-off Indian techies scrambling for options to stay in US
Note4Students
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: Lay-off impact on Indian techies
Thousands of Indian IT professionals in the US, who have lost their jobs due to the series of recent layoffs at companies like Google, Microsoft and Amazon, are now struggling to find new employment within the stipulated period under their work visas.
Recent layoff is US
- Nearly 200,000 IT workers have been laid off since November last year, including some record numbers in companies like Google, Microsoft, Facebook and Amazon.
- As per some industry insiders, between 30 to 40 per cent of them are Indian IT professionals, a significant number of whom are on H-1B and L1 visas.
What one means by Lay-Off?
- A layoff is the temporary or permanent termination of employment by an employer for reasons unrelated to the employee’s performance.
- Employees may be laid off when companies aim to cut costs, due to a decline in demand for their products or services, seasonal closure, or during an economic downturn.
- When laid off, employees lose all wages and company benefits but qualify for unemployment insurance or compensation (typically in USA).
Why do companies resort to layoffs?
- Cost reduction: One of the main reasons why workers get laid off is because the company decides to cut back on costs in some way. The need can arise from the fact that the company is not making enough profits to cover its expenses or because it needs substantial extra cash to address paying off debt.
- Staffing redundancies: Layoffs also occur when a company needs to eliminate some positions due to over-staffing, outsourcing, or a modification to the roles. A company may want to eliminate redundant positions in order to make its operations more efficient.
- Relocation: Moving the company’s operations from one area to another can also bring about the need to let go of some workers. Shutting down the initial location will not only affect the workers who get laid off but the surrounding community’s economy as well.
- Merger or buyout: If a business is bought out or decides to merge with another, the change might lead to a change in the company’s leadership and corporate direction. If there’s new management, the chances are that they’ll come up with new goals and plans, and this can lead to layoffs.
Immediate triggers of Lay-Off
- Pandemic Boom: During the pandemic, there was a surge in demand as people were in lockdown and they were spending a lot of time on the internet. The overall consumption saw an upsurge following which the companies went to increase their output to meet the market requirements.
- Over hiring during pandemic: In order to meet the demands, many tech companies went on a hiring spree anticipating the boom to continue even after the pandemic. However, as the curbs were eased and people started stepping out of their homes, consumption fell, resulting in heavy losses to these big tech companies. Some of these resources were hired at a higher cost because of the sudden upsurge in demand.
- Fear of recession: As the demand is coming back to pre-Covid levels and seeing the debt bubble almost about to burst and fearing recession, these companies are cutting down their costs by closing down low-performing projects and laying off the excess and high-cost resources they hired to accelerate growth.
- Russia-Ukraine War: The war has also contributed to these layoffs as it has made the market more volatile. This is clearly visible from stock market volatility.
- Inflation: Rising inflation has also impacted several world economies severely leading to a crisis in the job market as well. The world is currently hitting a reset button to overcome all these ups and downs.
Various US Visa Programs
1) H-1B visa
- What is it: The H-1B visa category covers individuals who “work in a speciality occupation, engage in cooperative research and development projects administered by the US Department of Defense or are fashion models that have national or international acclaim and recognition.”
- Who’s covered: The H-1B is most well known as a visa for skilled tech workers, but other industries, like health care and the media, also use these visas.
2) H-2B visa
- What it is: According to USCIS, the H-2B program allows US employers or agents “to bring foreign nationals to the United States to fill temporary non-agricultural jobs.”
- Who’s covered: They generally apply to seasonal workers in industries like landscaping, forestry, hospitality and construction.
3) J-1 visa
- What it is: The J-1 visa is an exchange visitor visa for individuals approved to participate in work-and-study-based exchange visitor programs in the United States.
Who’s covered: The impacted people include interns, trainees, teachers, camp counsellors, au pairs and participants in summer work travel programs.
4) L-1 visa
- What it is: The L1 Visa is reserved for managerial or executive professionals transferring to the US from within the same company, or a subsidiary of it. The L1 Visa can also be used for a foreign company opening up US operations.
- Who’s covered: Within the L1 Visa, there are two subsidiary types of visas
- L1A visa for managers and executives.
- L1B visa for those with specialized knowledge.
Why these matters?
- A significantly large number of Indian IT professionals, who are on non-immigrant work visas like H-1B are L1.
- They are now scrambling for options to stay in the US to find a new job in the stipulated few months’ time that they get under these foreign work visas after losing their jobs and change their visa status as well.
Impacts of Lay-offs
- Cut-throat market competition: Layoffs are a painful but expected fact of life in a market economy exposed to competition and trade.
- Immense loss to the workers: Layoffs can be damaging psychologically as well as financially to the affected workers as well as their families, communities, colleagues, and other businesses.
- Decreased customer loyalty: When a company lays off its employees it sends out a message to customers that it is undergoing some sort of crisis.
- Emotional Distress: The person who is laid off suffers the most distress, but remaining employees suffer emotionally as well. The productivity level of employees who work in fear is likely to go down.
Lessons for India
- Indian startups grew at a notoriously faster pace than its neighboring regions.
- But the layoffs are a sobering reminder that the bigger the startups became, the harder they fell.
- Just because a startup had touched a sky-high valuation did not immediately mean its employees’ jobs were insured.
Way forward
- Voluntary retirement program: This enables individuals to transition to retirement smoothly.
- Cut back on the extras: If a company is laying off workers to reduce costs, it can look for other avenues of saving money. For example, the company managers can freeze additional hiring, reduce or remove bonuses.
- Consider a virtual office: Another way to cut down on costs is to keep only the most important staff onsite and send the rest of the workers home to work remotely.
- Offer more unpaid time off: A company owner can also save money by offering more unpaid time off rather than eliminating workers’ positions.
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What is America COMPETES Act?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: America COMPETES Act
Mains level: US Visa policies and its impact for Indians
The US has unveiled the Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength (COMPETES) Act of 2022 that proposes to open up new vistas for talented individuals from across the world with a new start-up visa.
What is the COMPETES Act?
- The bill provides $52 billion to encourage more semiconductor production in the US, and $45 billion for grants and loans to improve supply chain resilience and manufacturing, among other programs.
- It also includes funding to address social and economic inequality, climate change, and immigration.
- For instance, it provides an exemption for STEM PhDs from the green card cap and creates a new green card for entrepreneurs.
- The bill also authorizes $600 million a year to construct manufacturing facilities to make the US less reliant on solar components made in Xinjiang, China.
Key provisions in the Act
- The Act amends the Immigration and Nationality Act to create a new classification of “W” non-immigrants for entrepreneurs with an ownership interest in a start-up entity.
- It seeks to establish procedures for foreign nationals with an ownership interest in a start-up entity to self-petition for lawful permanent resident status as an immigrant entrepreneur.
- The bill exempts from the numerical limits on immigrant visas certain foreign nationals (and the spouses and children of such aliens) who have earned a doctoral degree in STEM.
Implications for Indians
- It would mean more opportunities in the US for Indian talent, and for skilled workers.
- Every year, the US administration issues 85,000 H-1B work permits.
- Every year, Indians and Indian companies corner a lion’s share of the H-1B work permits issued that year.
- With this new category, Indian professionals will likely have a better shot at opportunities that the Act is likely to provide.
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What is H-1B Visa?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Various visas mentioned
Mains level: NA
The need for H-1B visas will continue to exist till the ‘talent challenge’ is tackled globally, even though the information technology industry has successfully adopted the work-from-home model amid pandemic-related travel restrictions.
Various US Visa Programs
1) H-1B visa
What is it: The H-1B visa category covers individuals who “work in a speciality occupation, engage in cooperative research and development projects administered by the US Department of Defense or are fashion models that have national or international acclaim and recognition.”
Who’s covered: The H-1B is most well known as a visa for skilled tech workers, but other industries, like health care and the media, also use these visas.
2) H-2B visa
What it is: According to USCIS, the H-2B program allows US employers or agents “to bring foreign nationals to the United States to fill temporary non-agricultural jobs.”
Who’s covered: They generally apply to seasonal workers in industries like landscaping, forestry, hospitality and construction.
3) J-1 visa
What it is: The J-1 visa is an exchange visitor visa for individuals approved to participate in work-and-study-based exchange visitor programs in the United States.
Who’s covered: The impacted people include interns, trainees, teachers, camp counsellors, au pairs and participants in summer work travel programs.
4) L-1 visa
What it is: The L1 Visa is reserved for managerial or executive professionals transferring to the US from within the same company, or a subsidiary of it. The L1 Visa can also be used for a foreign company opening up US operations.
Who’s covered: Within the L1 Visa, there are two subsidiary types of visas
- L1A visa for managers and executives.
- L1B visa for those with specialized knowledge.
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US policy wise : Visa, Free Trade and WTO
US, UK seek to sign New Atlantic Charter
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Atlantic Charter
US President Joe Biden and British Prime Minister Boris Johnson seeks to sign a new Atlantic Charter.
What is Atlantic Charter?
- The Atlantic Charter was a statement issued on 14 August 1941 that set out American and British goals for the world after the end of World War II.
- The charter’s adherents signed the Declaration by United Nations on 1 January 1942, which was the basis for the modern United Nations.
- The charter inspired several other international agreements and events that followed the end of the war.
- The dismantling of the British Empire, the formation of NATO, and the General Agreement on Tariffs and Trade (GATT) all derived from the Atlantic Charter.
Why sign new charter?
- At their meeting, the two leaders plan to sign what they’re calling a new Atlantic Charter, pledging to “defend the principles, values, and institutions of democracy and open societies.”
- US hopes to reassure European allies that the US had shed the transactional tendencies of Donald Trump’s term and is a reliable partner again.
- The US staunchly opposed the Brexit movement, the British exodus from the European Union that Mr. Johnson championed, and has expressed great concern with the future of Northern Ireland.
- Biden once called the British leader a “physical and emotional clone” of Trump.
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US policy wise : Visa, Free Trade and WTO
What is the EAGLE Act of US Visas?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: EAGLE Act
Mains level: US Visa policies and its impact for Indians
Legislation to remove the per-country cap on permanent residency visas, or green cards, for the US has been introduced in the House of Representatives.
What is the EAGLE Act?
- Eagle stands for Equal Access to Green cards for Legal Employment (EAGLE) Act, 2021.
- The act seeks to phase out the seven percent per-country limit on employment-based immigrant visas and raises the per-country limit on family-sponsored visas from seven percent to 15 percent.
- It provides for a nine-year period for the elimination of this limit.
- The seven percent limit was introduced in the mid-20th century, which has led countries with relatively small populations to be allocated the same number of visas as a relatively large-population country.
Benefits of the act
- It will benefit the US economy by allowing American employers to focus on hiring immigrants based on their merit, not their birthplace.
- The bill will be advantageous for Indian job-seekers who currently rely on temporary visas or await green cards to work in the US.
How does it help Indians?
- 75 percent of the backlog for employment‐based visas was made up of Indians.
- Backlogged Indian workers face an impossible wait of nine decades if they all could remain in the line.
- More than 200,000 petitions filed for Indians could expire as a result of the workers dying of old age before they receive green cards.
- With the EAGLE Act, the per-country cap would be removed, which may expedite the petitions for those applying for employment-based green cards.
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US policy wise : Visa, Free Trade and WTO
Private: Armenian Genocide
The US government is preparing to formally acknowledge the Armenian Genocide.
- According to a repor, the lawmakers and Armenian-American activists have been lobbying the US President to make the announcement on or before Armenian Genocide Remembrance Day, which will be marked on April 24.
- The move could deteriorate the US’s relations with Turkey.
About Armenian Genocide:
- The Armenian Genocide was the systematic mass murder and ethnic cleansing of around 1 million ethnic Armenians from Asia Minor and adjoining regions by the Ottoman Empire and its ruling party, the Committee of Union and Progress (CUP), during World War I.
- The Ottoman paramilitaries massacred local Armenians during their invasion of Russian and Persian territory.
- The massacres turned into genocide following catastrophic Ottoman defeat in the Battle of Sarikamish (January 1915), a loss blamed on Armenian treachery.
- At the orders of Talat Pasha, an estimated 800,000 to 1.2 million Armenian women, children, and elderly or infirm people were sent on death marches leading to the Syrian Desert in 1915 and 1916.
- The deportees were deprived of food and water and subjected to robbery, rape, and massacre.
- In the Syrian Desert, they were dispersed into a series of concentration camps.
- The Armenian Genocide resulted in the destruction of more than two millennia of Armenian civilization in eastern Asia Minor.
- With the destruction and expulsion of Syriac and Greek Orthodox Christians, it enabled the creation of an ethno-national Turkish state.
- Against the academic consensus, Turkey denies that the deportation of Armenians was a genocide or wrongful act.
Significance of this Recognition:
- The acknowledgement by the US government will have little legal impact on Turkey, other than becoming a cause for embarrassment for the country andgiving other countries the impetus to also acknowledge the genocide.
- According to the Armenian National Institute, 30 countries officially recognise the Armenian Genocide.
Turkey’s Response:
-
- Such moves would only set back the already strained relationship between US and Turkey, both of whom are North Atlantic Treaty Organization allies.
- Ties between the US and Turkey have been strained over a range of issuesthat include Turkey’s purchase of Russian S-400 defence systems, foreign policy differences with regard to Syria, human rights and other intersecting legal issues.
- Turkey has acknowledged that atrocities were committed against Armenians, but denies it was a genocide (which comes with legal implications) and challenges the estimates that 1.5 million were killed.
India’s Stand:
-
- India, that has not formally recognised the Armenian Genocide has primarily adopted this stance in the interests of its wider foreign policy decisions and geo-political interests in the region.
- India does not have any domestic law on genocide, even though it has ratified the United Nations Convention on Genocide.
- This was even observed by the Delhi High Court in State v. Sajjan Kumar(2018). The case concerned the mass killing of Sikhs during the anti-Sikh riots in 1984 in Delhi — and throughout the country.
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US policy wise : Visa, Free Trade and WTO
H-1B visa amid the U.S. elections
Note4Students
From UPSC perspective, the following things are important :
Prelims level: H-1B term
Mains level: Paper 2- H-1B visa issue
Trump administration’s two moves on the visa could have implication for both India and corporate America. It needs to be seen whether the situations will remain the same after the Presidential elections in the U.S.
Context
- The U.S. President announced a hike in the salaries for those arriving in the U.S. on H-1B or skilled-worker visas.
Implications for India
- This hike is expected to cut visa applications by around 33%.
- Trump administration has in its earlier executive actions banned the issuance of new skilled worker visas and new green cards.
- India’s export of services to the U.S. is estimated to be at $29.6 billion in 2018, 4.9% more than in 2017, and 134% more than 2008 levels.
- The U.S. has been issuing 85,000 H-1B visas annually, of which 20,000 are given to graduate students and 65,000 to private sector applicants, approximately 70% of which are granted to Indian nationals.
- The visa issuance ban, combined with the mandatory salary floor soon to be instituted, will seriously hit U.S. imports of services from India.
Criticism of the move
- A federal judge in the Northern District of California blocked the enforcement of the new visa ban, ruling that the President “exceeded his authority” under the U.S. Constitution.
- Google CEO hit out at the ban, saying, “Immigration has contributed immensely to America’s economic success, making it a global leader in tech, and also Google the company it is today.”
Consider the question “What makes the H-1B visa important for India? What are the implications of the recent rise in the salary floor by the U.S. for the visa on India?”
Conclusion
While the ban and floor limit on salary come in the election milieu, India should prepare for the after election scenario.
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US policy wise : Visa, Free Trade and WTO
Trading with America
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- Need for India to take a look at its current trade policy.
Context
Trump has made India’s trade headache more acute. But he has also opened up opportunities.
Political polarisation in both countries
- Impeachment attempt: The Democrats in the US have struggled to oust Trump from the White House and rarely find anything they can agree with their President on.
- The deeper political divide in India: While ousting Narendra Modi through a legal process of impeachment is not an option in India, the political divide is even deeper.
- No consensus on foreign policy
- Under Trump, consensus on foreign policy in Washington has broken down.
- In Delhi, the Opposition has never been willing to acknowledge the diplomatic successes of the government.
- But the usually bipartisan support for foreign policy in the strategic community has eroded.
- Many leading voices of the establishment who have a long and distinguished service have become major critics of foreign policy.
Comparison of India’s trade with the US and China
- Trade with the US: In 1995, total two-way trade, including goods and services, between India and the US was $11 billion.
- In 2018, it crossed $140 billion.
- It is reported to be around $150 billion in 2019.
- In trade with the US, India enjoys a surplus of nearly $23 billion.
- A 14-fold increase in trade turnover in 25 years is certainly not something to sneer at.
- Can India and the US do better on trade? Yes, of course.
- Only a few years ago, the two sides were looking at an annual trade target of $500 billion. That looks rather ambitious amidst the current disputes
- Trade with China: India’s China trade too has risen, even more rapidly.
- From a couple of hundred million dollars in the mid-1990s to nearly $90 billion in 2019.
- India has a deficit of nearly $57 billion with China.
Trade disputes between India-US
- Trade has long been a contentious issue between Delhi and Washington.
- There had been enduring tension since the late 1980s between the US demand for-
- Greater market access.
- Intellectual property protection.
- And a host of other demands and India’s own cautious approach to economic liberalisation.
- Rise in pressure under Trump administration: All recent US administrations have applied continuous pressure on India for trade agreements.
- The pressure has significantly risen under President Trump.
- Trade dispute at the centre of the relationship: If his predecessors were willing to cut some slack for India by citing larger political and strategic considerations in the bilateral ties, Trump has put trade disputes at the front and centre of the relationship.
- Officials in the Department of Commerce and the US Trade Representative’s office have adopted extremely aggressive tactics in the negotiation with India.
- Result of a radical reorientation of US trade policy: Trump has undertaken a radical reorientation of US trade policy.
- For Trump, this is a matter of long-standing ideological conviction as well as a political convenience.
- He has bet that the anti-free-trade White working classes in the American rust belt are the key to his re-election.
- No option but to deal with it: Given America’s pole position in the global trading system, you have no option but to deal with it.
- Trump is getting away with his demand for the restructuring of trade relations with key economic partners.
- He has renegotiated the NAFTA with neighbours Canada and Mexico and has compelled China to start reducing the massive trade deficit with the US.
- The difference in India and China’s response to the US: In response to Trump’s pressure, Xi reaffirmed his commitment to economic globalisation and domestic liberalisation and wooed American investors with even greater vigour than before.
- India embracing protectionism: India appears to be sending the opposite signal — of a definitive drift towards protectionism. India’s trade troubles are certainly not limited to the engagement with the US.
Problem with India’s trade policies
- India walking away from RCEP: Delhi walked away at the very last minute from signing the RCEP agreement last year to deep disappointment among its partners including the ASEAN, Australia, Japan and New Zealand.
- The trade deficit with China: One of the main arguments cited by India was the massive trade deficit with China and the potential danger of it widening further under RCEP.
- Failure in negotiations with the EU: The European Union is reluctant so far to restart trade negotiations that ended in great frustration for Brussels some years ago.
- No deal with Australia and New Zealand: Australia and New Zealand have given up.
- Neighbours complaint: India’s immediate neighbours complain that India’s rhetoric on connectivity and regionalism is matched by the multiple non-tariff barriers that continue to constrain commerce across the South Asian frontiers.
- Why so many deals are pending? It is certainly probable, statistically, one in a million, that the fault lies, always, with India’s partners. But one would think there might be a real problem with Delhi’s own trade policies.
Conclusion
- New opportunity: Trump has certainly made India’s trade headache more acute. But he has also opened up opportunities.
- His trade war on China has put pressure on the global supply chains centred around China.
- India not the beneficiary of the US-China trade war: Many companies are moving their production out of China, but only a few are turning towards India.
- While Delhi has talked the talk on taking advantage of the US-China trade war, it is yet to get its act together.
- No opposition against protectionism at home: What makes Delhi’s devaluation of trade as a key instrument of economic growth potentially irreversible is the fact that there is little domestic political opposition to it.
- Time to take a hard look at trade policy: For now, though, India’s partnership with the US might not only survive the current trade tensions but advance during Trump’s visit.
- There is so much happening elsewhere in the relationship — especially in the defence and security domain.
- But the time has come for Delhi to take a hard look at its current trade policy that threatens to undermine India’s regional and international prospects.
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US policy wise : Visa, Free Trade and WTO
USTR takes India off Developing Country List
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- Designation of India as developed country by the US and its implications for India-Strategy to counter the impact.
Context
The United States’s annual exercise of designating developing, and least developed countries has assumed importance for India this year: it has been dropped from the list of developing countries.
‘Developing’ or ‘developed’ country designation by the US
- Last week, the United States officially designated developing and least-developed countries for the purposes of implementing the countervailing measures.
- The division is provided by the Agreement on Subsidies and Countervailing Measures (ASCM) of the World Trade Organisation (WTO).
- Why the designation matters?
- The higher level of subsidies allowed: According to the ASCM, developing countries are allowed to grant higher levels of subsidies as compared to the developed countries before countervailing duties (CVD) can be imposed.
- What are the limits? The maximum limit of the subsidy is-
- For developed country: Limit is maximum 1% of the import value of the investigated product.
- For developing country: Limit is a maximum 2% of the import value of the investigated product.
- If the limit is breached the importing country can impose a countervailing duty on the product.
India as a target by the US
- Provision of self-designation: Under the WTO rules, any country can “self-designate” itself as a developing country.
- No criteria specified by the WTO: The WTO does not lay down any specific criteria for making a distinction between a developed and a developing country member, unlike in the World Bank where per capita incomes are used to classify countries.
- Arbitrary criteria used to designate India: Despite this clearly laid down criterion in the WTO rules, the United States Trade Representative (USTR) employed an arbitrary methodology that took into consideration-
- “Economic, trade, and other factors, including the level of economic development of a country (based on a review of the country’s per capita GNI) and a country’s share of world trade” to exclude India from list of designated developing countries.
- Second such instance after denying GSP: Excluding India from the lists of developing countries for the purposes of using countervailing measures or denying benefits of GSP are but two of the more recent initiatives that the U.S. has taken to challenge India’s status as a developing country in the WTO.
What would the impact on India?
- Loss of Special and Differential Treatment (S&DT): India would lose the ability to use the special and differential treatment (S&DT) to which every developing country member of the WTO has a right.
- What is S&DT? In short, S&DT lessens the burden of adjustment that developing countries have to make while acceding to the various agreements under the WTO.
- How S&DT benefited India?S&DT has been particularly beneficial for India in two critical areas: one, implementation of the disciplines on agricultural subsidies and, two, opening up the markets for both agricultural and non-agricultural products.
- Limits on subsidies: The WTO Agreement on Agriculture(AoA) provides an elaborate discipline on subsidies.
- Subsidies are classified into three categories, but two of these are virtually outside the discipline since the WTO does not limit spending on these categories of subsidies.
- Limits on price support measures: The discipline exists in case of price support measures (minimum support price) and input subsidies which is the more common form of subsidies for most developing countries, including in India.
- Limits on spending on prices support measures: For developing countries, spending on price support measures and input subsidies taken together cannot exceed 10% of the total value of agricultural production.
- In contrast, developed countries are allowed to spend only 5% of their value of agricultural production.
Shifting to DBT
- Why shifting to DBT necessary? India is a major user of price support measures and input subsidies.
- And given the constraints imposed by the AoA, the government has spoken about its intention to move into the system of direct benefit transfer (DBT) for supporting farmers.
- No limit on spending through DBT: A shift to DBT is attractive for India since there are no limits on spending, unlike in case of price support measures and input subsidies.
- Rework subsidies’ programme: Faced with on-going farm distress, the government has had to rework its subsidies’ programme in order to extend greater benefits, especially to small and marginal farmers.
- Challenges in the implementation of DBT
- Implementation of DBT in agriculture has several insurmountable problems.
- Difficulty in identifying the beneficiary: Targeting potential beneficiaries of DBT seems difficult at this juncture for a number of reasons, including inadequate records of ownership of agricultural land on the one hand, and the presence of agricultural labour and tenants on the other.
- This implies that in the foreseeable future, India would continue to depend on price support measures and input subsidies.
- How it matters: Given this scenario, the government needs the policy space to provide adequate levels of subsidies to a crisis-ridden agricultural sector.
- And therefore it is imperative that continues to enjoy the benefits as a developing country member of the WTO.
Issue of tariffs
- The issue of market access, or the use of import tariffs, is one of the important trade policy instruments.
- Provision of no reciprocal tariff cuts: It has some key provisions on S&DT, which the developing countries can benefit from. The most important among these is the undertaking from the developed countries that they would not demand reciprocal tariff cuts.
- Over the past two years, the government of India has been extensively using import tariffs for protecting Indian businesses from import competition.
- With the increasing use of tariffs, almost across the board, India’s average tariffs have increased from about 13% in 2017-18 to above 17% at present.
- Why it matters? Developed country members of the WTO have generally maintained very low levels of tariffs, and, therefore, India’s interests of maintaining a reasonable level of tariff protection would be well served through its continued access to S&DT, by remaining as a developing country member of the WTO.
Conclusion
With the changing stance of the US towards India, the government must ensure its international trade and agriculture at home is not adversely impacted.
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US policy wise : Visa, Free Trade and WTO
A new approach on investment
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- Trade deal with the US, issues involved.
Context
When Prime Minister Narendra Modi welcomes U.S. President Donald Trump to India this month the two leaders are expected to sign a first-ever trade agreement.
What will be on the agenda of the trade deal?
- GSP issues: The restoration of India’s Generalised System of Preferences benefits,
- Pricing of medical devices.
- And agriculture trade are all important.
- Incremental outcomes: If the two sides continue efforts to achieve incremental outcomes, the start of negotiations on a comprehensive free trade agreement (FTA) could even be a credible scenario. Presently, this is not the case.
What could be the incremental outcomes?
- The most obvious candidates are-
- Intellectual property rights (IPR).
- IPR has historically been an area of contention between the two, but discussions on IPR have progressed well in recent years.
- Digital trade.
- Both are grappling with the appropriate scope and approach for regulating electronic commerce issues in this digital age.
- Ideally, there should be room to seriously consider better ways to encourage skilled professionals to work in the other’s economy.
- Progress on the investment
There are already some shared interests in the area of investment.
- For example, India invests in the U.S. and continues to seek U.S. investment in India.
- FDI issue: Foreign direct investment (FDI), this is an important moment to do more to encourage it than simply welcoming it.
- Need to negotiate o investment: Ideally, the two sides should move ahead to negotiate an agreement on investment matters that can provide greater transparency, predictability, and regulatory certainty to investors from the other country.
- Negotiation on FDI off the table: It appears that the traditional approach through which countries pursue commitments on FDI, bilateral investment treaties, or ‘BITs’ (bilateral investment treaties) is off the table.
- The Trump administration has put a hold on negotiating additional BITs and appears to be suspicious of how well they balance U.S. interests.
- The Indian government is similarly sceptical of BITs, having cancelled all existing ones soon after it came into office.
Need for the new approach on the investment issues
- Until they resume their work on BITs, the two sides may find common ground in devising a new approach to investment issue.
- What the new approach involve?
- Taking cues from their respective FTAs: A starting point should be to review what they have done in their recent FTAs.
- Abandonment of investor-state dispute settlement: The recently concluded U.S.-Mexico-Canada Agreement contains a novel approach on investment notably its abandonment of investor-state dispute settlement with respect to the U.S. and Canada.
- Similarly, the Regional Comprehensive Economic Partnership, which India had been negotiating with ASEAN, Australia, China, Japan, Korea, and New Zealand, does not include investor-state dispute settlement.
- While India chose not to join the Regional Comprehensive Economic Partnership when it was concluded at the end of last year, it appears to have been on board with the FTA’s investment provisions.
- Where the agreement focus as of now? For now, however, both countries should focus on what is doable. A U.S.-India investment agreement could focus on-
- Fair treatment for investors from the other country.
- Regulatory transparency and predictability.
- And approaches for resolving concerns short of investor-state dispute settlements.
- At a later stage: At a later stage-
- Most likely when the two are prepared to negotiate a more comprehensive bilateral FTA, they can go further on investment matters.
Conclusion
A new, hybrid approach on investment would be a substantial step in the right direction. It will be critical to sustaining momentum coming out of a first trade deal when the two leaders meet in Delhi. If India and the U.S. fail this test, the trade relationship is more likely to languish than blossom.
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