US Versus India Hidden American Export Advantages

According to Census Bureau statistics, the U.S. trade deficit with India was US$4.7 billion for 2009.

That figure represents a 33.6% improvement over America’s $7.1 billion trade deficit with India in 2008. U.S. purchases of imported Indian products slumped to $21.2 billion in 2009 – a 17.8% drop from the $25.8 billion worth of Indian exports sold to the U.S. one year earlier.

Also in 2009, U.S. exports to India were down 11.8% to $16.5 billion from $18.7 billion during 2008.

U.S. Trade Surplus Versus India by Product

Sales for U.S. exports to India outpaced comparable Indian imports in 2,089 of the total 4,165 product categories that the 2 nations traded during 2009.

When a country’s exports exceed imports exchanged with another nation, that country has established a competitive trade advantage over its partner. Therefore, the U.S. posted competitive advantages in 50% of products exported to and imported from the world’s second-most highly populated nation.

Below are the top 10 American export advantages resulting in U.S. trade surpluses with India by product.

Top 10 U.S. Versus India Export Advantages

Listed below are the top 10 U.S. exports to India with the highest trade surpluses in 2009. The harmonized tariff system code for each export product category is shown within brackets.

  1. Aircraft and spacecraft including parts (code 880000) … US$2.2 billion trade surplus (down 16.3% from 2008)
  2. Diammonium phosphate chemical fertilizer (310530) … $1 billion (down 61.2%)
  3. Non-monetary gold (710812) … $642.9 million (up 29.8%)
  4. Oils from high-temperature coal tar (270799) … $417.8 million (up 13.2%)
  5. Coal (270112) … $346 million (down 4.1%)
  6. Computer modems, switches and routers (851762) … $285.2 million (down 7.8%)
  7. Iron waste and scrap (720449) … $258.7 million (up 5.3%)
  8. Gas turbines (841182) … $176.7 million (up 383.9%)
  9. Parts for boring or sinking machinery (843143) … $150 million (down 12.9%)
  10. Almonds (80211) … $138.8 million (down 1.4%).

Root Causes for U.S. Export Advantages Versus India

By servicing the needs of India’s growing aerospace industry with proven technology and engineering excellence, U.S. aircraft and spacecraft sales generated the largest American trade surplus by export product category.

The U.S. also has a billion-dollar competitive trade advantage in inorganic chemical fertilizers. American exports of diammonium phosphate are used to grow crops in India.

America also exported more non-monetary bullion to India compared to Indian gold shipments that U.S. importers bought.

Other exports where the U.S. had significant competitive advantages support a wide range of needs as the Indian economy matures.

Imported American coal remains in demand to meet Indian electrical power requirements, despite the fact that India is a leading coal-producing country. U.S. modems, switches and routers support India’s growing telecommunication infrastructure. American almond exports help feed India’s vast population partly because almonds can be shipped over long distances and stored for relatively long periods of time.

U.S. Export Trade Opportunities in India

Lower wages in India may be partly behind U.S. trade surpluses in exports of iron scrap metal, gas turbines and drilling machinery parts. Paid lower wages than in the States, Indian workers create final products from these intermediate materials and components. India exporters then ship out finished products:

  • made from recycled scrap metal
  • with gas turbine engines added
  • reassembled with boring or sinking machinery parts.

If the value of finished products that India exports back to the U.S. continues to be higher than what American exporters earn for source materials sent to India, then the U.S. trade deficit will remain high.

However, if India consumes more of the finished products made from U.S. imports or sells them to other countries, then the U.S. stands to benefit from the increased demand for products where the U.S. already has established competitive advantages.