U.S. Removes Sanctions on India Boosting Technology Trade Between the Two Countries

by Ketaki Sood
Larta Research Economist

November 18, 2002

Relations between India and the United States were antagonized in 1998 when India conducted nuclear-bomb tests, provoking retaliatory blasts from Pakistan. The tests were a slap in the face to the Unites States' global anti-proliferation effort. The US was quick to react with post-test economic and military sanctions against the two countries. The sanctions included a ban on the sale of military equipment and restricted trade in goods with potential military uses.

The first signs of the sanctions being removed came after the September 11 attacks, with George Bush pressing to remove the sanctions imposed on India and Pakistan. The US would clearly benefit from better relations with both South Asian countries, especially after its declared war on terrorism. The breakthrough finally came last week, as India and the US agreed to boost high-technology trade with each other, including trade in nuclear and military equipment. In addition, the two countries agreed to create an India-U.S. high technology cooperation group that is aimed at facilitating trade in dual use goods and technologies. Such an effort comes after a three-decade ban on India's access to dual use technology to restrict India's development of nuclear arms. The ban covered about 151 Indian companies and government entities that were denied access to dual use technology.

In addition to fostering greater cooperation and easing legal and obligatory regulations in the civilian and nuclear sectors, the agreement is expected to make it easier for India's communications, electronics and computer sectors to access US technology. India's exports to the US have been on a rise since 1991, when India undertook massive liberalization reforms. Trade relations between the two countries are only expected to improve with this agreement.