Experts discuss impact of India being put on exclusive list of trade partners by Trump administration

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United States Commerce Secretary Wilbur Ross announced July 30, that India has been put on the Tier 1 level in the U.S. Strategic Trade Authorization (STA) license exception. Only 36 other countries, mostly NATO allies, have this trade status, and India becomes the only South Asian nation in this seemingly exalted position. The other non-NATO countries among the 36 that have the STA-1 status include South Korea, Japan, Australia, Argentina, Sweden, and Switzerland.

American experts familiar with the subject say the upgrade is significant more as a measure of the growing confidence in India and because its time had come, rather than in actual dollars on the ground. India, which was already a “Major Defense Partner” since 2016, will now be able to receive more U.S. high technology and military items without individual export licenses, Secretary Ross announced shortly before participating in the Indo-Pacific Business Forum held at the U.S. Chamber of Commerce in Washington, D.C., attending by leaders in U.S. business and industry as well as top policymakers and diplomats.

The upgraded level puts India on par with Washington’s NATO allies, Ross noted, expanding the scope of exports subject to the Export Administration Regulations (EAR) that can be made to India without individual licenses. The Commerce Department sees this change leading to a greater volume of U.S. exports to India. “The category in which India has been placed is basically the loosest category a country can be,” vis-a-vis the U.S. in the area of sensitive technology trade, said Ambassador Teresita Schaffer, a former Deputy Assistant Secretary of State for the Near East and South Asia at the State Department, and co-author of the book, “India at the Global High Table.”

Putting India on this level is an expression of Washington’s confidence in India’s ability to control its own export regime, Schaffer told News India Times. And it’s taken a long time to get here through negotiations begun in the 1990s with the Next Steps in Strategic Partnership (NSSP), something the current U.S. Ambassador to India Kenneth Juster was closely involved in.

“We enthusiastically welcome @SecretaryRoss’s announcement at the #IndoPacificBizForum on India becoming a Strategic Trade Authorization (STA) Tier 1 country. Positive strides in #USIndiaDefense & #USIndiaTrade relations!” tweeted Ambassador Juster. What STA-1 does is authorize a country that buys sensitive technologies from the U.S., (in the specified areas of national security, chemical and biological weapons, nuclear non-proliferation, regional stability, crime controls, and other significant items) to have them exported from the U.S., re-export them, and move those products intra-country, with the caveat that it not be re-exported to areas that are a national security risk.

The other non-NATO countries among the 36 that have the STA-1 status include South Korea, Japan, Australia, Argentina, Sweden, and Switzerland.

Over the last seven years, approximately $9.7 billion worth of licensed exports to India may now eligible for export under this license exception, the Commerce Department said. At the Indo-Pacific Business Forum, Ross said products that New Delhi had not bothered to ask for in the past because of its status, would now be exportable from the U.S.

“India’s status as a Major Defense Partner led to its becoming a Strategic Trade Authorization (STA) Tier 1 country, comparable to our NATO allies, under the Department of Commerce’s Export Administration Regulations,” Secretary Ross said. “This reflects India’s membership in three of the four multilateral export control regimes, as well the development of its national export control system,” Ross said, adding that U.S. companies will be able to more efficiently export a muchwider range of products to Indian high technology and military customers.

“India’s new status will benefit U.S. manufacturers while continuing to protect our national security,” Ross emphasized. However, “It’s impact on actual trade flows will be relatively modest,” according to Rick Rossow, senior advisor and Wadhwani Chair in U.S.-India Policy Studies at the Center for Strategic and International Studies.

Rossow, who has previously served as deputy director of the U.S.-India Business Council and as director for South Asia at the consultancy firm, McLarty Associates, believes it’s a welcome step coming after a year of troubled trade waters between the U.S. and India, starting with President Trump declaring he would take measures against countries that had a negative trade balance with the U.S., India’s budget which placed customs duties on 50 different products, etc., aluminum tariffs where India is a big exporter of aluminum to this country, World Trade Organization disputes, a rather dull national security cooperation, immigration policies affecting Indian techies and business etc.

The upgrade to STA-1, Rossow maintained, “will have a big impact more on the ‘mentality’ governing the bilateral relationship, particularly the strategic policymakers who are already courting each other.

India’s Ambassador to the U.S. Navtej Sarna said, “It is a sign of trust not only in the relationship but also on India’s capabilities an economy and as security partner, because it also presupposes that India has the multi lateral export control regime in place, which would allow the transfer of more sensitive defence technologies and dual use technologies to India and without the risk of any proliferation,” Press Trust of India report.

“It is a logical culmination to India’s designation as a major Defence partner of the US and a reaffirmation of India’s impeccable record as a responsible member of the concerned multilateral export control regimes,” news reports quoted an Indian Ministry of External Affairs spokesperson saying. “This step will further facilitate India-US trade and technology collaboration in defence and high technology areas. We look forward to the US side operationalising the decision at an early date,” he added.

Secretary Ross in his statements emphasized U.S. confidence in India’s Export Control Regime, Schaffer pointed out. That India has reached a point of implementing its ECR, and that this regime became an issue with the U.S., “is in some ways an indication of how far the Indian economy has come and how India sees its role, including its economic role, in the world” Schaffer said.