US wants bilateral treaty modelled on India’s FTAs with Japan & South Korea

Dipanjan Roy Chaudhury, ET Bureau | 9 Feb, 2016

NEW DELHI: A draft copy of the proposed India-US Bilateral Investment Treaty is not ambitious enough to attract American investors to India, feels Washington, which would rather prefer an agreement similar to the ones Delhi has signed with Japan and South Korea. “What India has proposed is not yet attractive enough for the US,” an American government source said.

India had shared a model text of the proposed treaty (BIT) with the US last year. The issue had come up for discussion at the US-India Trade Policy Forum (TPF) meeting in Washington last year, and bet over the past year, both sides held formal negotiations on BIT either in person or through video conferencing.

According to the US source, the Barack Obama administration feels that the current form of agreement does not provide robust market access. There are differences over the issue of Japan or Indo-South Korea trade treaties should be the model for the India-US BIT. Japan and South Korea are two big investors in India. Signed in 2009, the Comprehensive Economic Partnership Agreement (CEPA) is a free trade agreement betover agreement eases restrictions on foreign direct investments and companies can own up to 65% of a company in the other country. Indo-Japan CEPA came into force in 2011. The pact seeks to abolish import duties on most products, increase access for Indian professionals and contractual service suppliers to the Japanese market and liberalise investment rules.

According to the officials in the Obama administration, US investments into India and vice-versa are being carried out irrespective of a bilateral BIT. American investments in India amount to $28 billion and Indian investments in the US amount to $ 18 billion. Sources feel that under such circumstances, the Narendra Modi government has to make attractive offers for concluding the BIT as the Obama administration has entered its last leg.

Incidentally, both governments separately decided to review their model texts of BITs and reviews happened consecutively. When Barack Obama visited Delhi in January 2015 the two sides decided to pick up threads on BIT.

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