In business and trade, bargaining power often determines who sets the terms. From real estate to e-commerce, examples abound where one party effectively finances the other’s operations — a dynamic that also offers insight into how global trade agreements take shape.
Consider India’s property market. Developers typically collect around 25% of an apartment’s basic price before construction begins, with buyers frequently funding this through bank loans. As projects progress, further payments are sought, often long before possession. Industry estimates suggest developers earn gross margins of 25–30%, raising a blunt reality: in many cases, buyers’ borrowed money helps fund the builder’s profitability.
Similar asymmetries appear elsewhere. Commission agents in agricultural mandis extend unsecured, interest-free advances to farmers to secure future business. Dominant manufacturers — including companies such as Asian Paints and Maruti Suzuki — have built powerful negative working capital models, collecting cash from customers before paying suppliers. Lawyers often demand advance fees regardless of case outcomes, while e-commerce platforms typically collect from customers upfront but release payments to sellers weeks later.
These arrangements persist because both sides perceive value despite uneven leverage. The party with stronger capital, market access or expertise dictates terms; the weaker party accepts because alternatives are limited.
Trade follows economic gravity
The same logic underpins bilateral trade. Agreements between countries rarely produce perfectly equal gains; instead, they reflect relative strengths. The United States brings technological leadership, deep capital markets and vast consumer demand. India offers a young workforce, expanding middle class, competitive services exports and growing manufacturing capability.
Bilateral trade between the two countries already exceeds $190 billion annually, making the US India’s largest trading partner. Indian IT services, pharmaceuticals and engineering goods enjoy strong demand in American markets, while US technology, energy products and aircraft continue to find buyers in India.
Past experience suggests trade deals create both winners and adjustment pressures. India’s free trade agreement with ASEAN in 2009 drew criticism over rising imports, yet overall trade with the bloc has more than doubled since 2010. While some domestic sectors faced strain, others — including pharmaceuticals — expanded significantly.
Managing the transition
Analysts expect any future India-US trade pact to follow a similar pattern. Competitive Indian sectors — IT services, pharma, auto components and scaled agricultural producers — could gain. More vulnerable segments, particularly small farmers and low-technology manufacturers, may require policy support to adapt.
Ultimately, trade agreements do not create economic momentum so much as channel it. Like water following the path of least resistance, commerce flows where mutual benefit exists. The real test for policymakers comes after signatures are inked: ensuring that the gains from expanding trade are widely distributed, while cushioning those forced to adjust to a more open marketplace.
