India-US trade ties take a tech turn

This is undoubtedly a major development as these technologies were inaccessible in the past due to the complex export control regimes of the US Administration.
India-US trade ties take a tech turn

Prime Minister Narendra Modi’s recent state visit to the US was possibly the most significant in his nine years as the head of government, from the view of both the global attention it attracted and the number of key bilateral agreements reached. Importantly, the focus of these agreements was overwhelmingly on critical technologies, which US entities would provide to India in several emerging areas. This is undoubtedly a major development as these technologies were inaccessible in the past due to the complex export control regimes of the US Administration.

The foundation for these agreements was laid in 2022 when the two countries endorsed the India-US initiative on Critical and Emerging Technology (iCET) for expanding the strategic technology partnership and defence-industrial cooperation between the governments, businesses, and academic institutions. It was intended to enhance inter-agency cooperation for strengthening innovation ecosystems, covering several specific areas, including resilient semiconductor supply chains, next-generation telecommunications, space, defence innovation and technology cooperation.

Over the past few years, the government has tried to reduce India’s dependence on China for electronic products and intermediaries. To this end, in 2022, it adopted the Modified Scheme for setting up domestic semiconductor wafer fabrication facilities to attract big investments. Considering the importance of semiconductors for strengthening electronics manufacturing capacities through a robust value chain, the government is providing significant fiscal support to potential manufacturers.

This initiative for producing semiconductors was boosted during Modi’s visit, with the signing of the MoU on the Semiconductor Supply Chain and Innovation Partnership, expected to be a significant step in coordinating the semiconductor incentive programmes of India and the US. The agreement on coordinating the domestic production of semiconductors in the two countries is significant because, in 2022, the Biden Administration enacted the CHIPS and Science Act to boost semiconductor manufacturing in the US. With several countries, including the EU, unveiling plans for increasing domestic production of semiconductors, it has become imperative to coordinate production between these countries to avoid the widely predicted “chips war”.

The signalling of policy coherence between India and the US on semiconductors has already seen a positive response from the industry. A US chipmaker Micron Technology announced that it would invest up to $825 million to build a new semiconductor assembly and test facility in India, taking advantage of the fiscal support being extended by the Indian government. The investment in the proposed facility is expected to create 5,000 direct jobs. Complementing this initiative, two other companies have proposed to train Indian engineers to accelerate India’s semiconductor education and workforce development, and to establish a collaborative engineering centre in India.

Access to green technologies has been a major stumbling block for developing countries, including India, preventing these countries from engaging wholeheartedly in climate mitigation and adaptation programmes. While the inadequacy of climate finance for these countries has been in focus, the inaccessibility of green technologies has hardly found mention. India and the US took a step forward here in 2021 when their leaders endorsed the US-India Climate and Clean Energy Agenda 2030 Partnership to accelerate progress toward shared climate and clean energy goals. Under this, joint efforts are planned to develop and deploy energy storage technologies.

The two countries also launched the US-India New and Emerging Renewable Energy Technologies Action Platform for accelerating cooperation in green hydrogen, offshore and onshore wind, and other emerging technologies. Unlike in the case of semiconductor production in India, where the two countries have jointly sought end-to-end solutions, on India’s adoption of a climate-friendly pathway, the US has promised to merely facilitate this process. Moreover, US companies have not been forthcoming in proposing collaborations with Indian partners. The two leaders have committed to “undertake regular efforts to address export controls, explore ways of enhancing high technology commerce, and facilitate technology transfer between the two countries”. Whether India can quickly and effectively transition towards a green economy largely depends on fulfilling these commitments.

Trade has always figured prominently in the India-US agenda. In the latest round of discussions, the two countries decided to prepare the ground for enhancing bilateral trade flows by terminating six outstanding disputes at the World Trade Organization. India agreed to remove the retaliatory tariff on steel and aluminium and several agricultural products imposed during the Trump presidency. The US dropped its complaint against India’s export promotion policies, though India discontinued the use of these policies in 2021. Resolution of trade disputes through mutual consultations can be preferable for major economies as there is little scope for arm-twisting. So, India and the US have taken a step in the right direction.

This approach could stand the two strategic partners in good stead for resolving their differences in several critical areas they have agreed to collaborate in. These include the implementation of Digital Public Infrastructure, in which the views of India and the US are quite divergent. This is especially due to India’s reluctance to allow the free flow of data across borders. In the agreements involving technology transfer, the US has consistently pressed for amendments in India’s Patents Act as a precondition. India has drawn a red line on this issue, especially because the Patents Act ensures that generic drug companies can produce affordable medicines. A key element of the India-US strategic partnership that went through another round of strengthening in Washington is appreciating each other’s critical concerns. Hopefully, this spirit will help resolve the piquant issues between both countries.

Dr Biswajit Dhar

Former professor, Jawaharlal Nehru University and Vice President, Council for Social Development

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The New Indian Express