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AS OVER 75 countries race to sign a trade deal with the US during the 90-day pause window to avert reciprocal tariffs, New Delhi is banking on its ability to replace third-country imports to the US, thereby helping to bridge the trade gap with Washington, a senior government official said.
The official said that virtual discussions will begin this week, leading to broad clarity over the next six weeks — by the end of May — on what duty concessions can be offered by both sides, with the aim of signing a bilateral trade agreement (BTA) by Fall as per the joint statement. But if substantial progress is made within the 90-day window, and if there is a requirement, India and the US could sign an interim deal, the official added.
Responding to concerns that concessions offered to other countries, such as Vietnam, under a US trade deal may put India at a disadvantage, the official said India is in a stronger position due to its ability to address the trade deficit with the US and absorb more imports.
“The US has raised concerns over tariffs and the trade deficit in India’s case. It has raised different issues with other countries — such as subsidies, trade rerouting and currency manipulation. But for India, replacing imports from other countries with US goods is not a difficult proposition. That could be one of the outcomes of the BTA. India’s exports to the US would also rise, and that is how overall trade could reach $500 billion,” the official said.
Notably, Commerce Minister Piyush Goyal on Friday said that India would not negotiate under pressure. “India will not negotiate with a gun to its head. Though timelines are often discussed for FTAs, no agreement should be signed merely to meet deadlines. Our national interest remains paramount,” Goyal had said.
“The India–US relationship is highly integrated, and we are in a much better position in the negotiations. The US Treasury Secretary and USTR (US Trade Representative) have both indicated that talks with India are progressing well. We are assessing what can realistically be completed within six months, and the remaining issues will continue to be discussed beyond that timeframe. However, some rule-based aspects will require more time,” the official noted.
The official also clarified that the trade agreement will comply with World Trade Organisation (WTO) rules, and that allegations about the US abandoning the current world trade order may be incorrect. This comes amid allegations that several measures announced by US President Donald Trump don’t comply with WTO norms.
“India has never signed a trade deal that is not WTO-compliant. Whether it’s called a BTA, FTA or any other term — it is merely nomenclature for a trade agreement,” the official said.
Even Section 301, which the US has invoked, falls under the “security exception” clause of the WTO, the official added. “The use of the security exception can be debated, but so far, whatever the US has done, it has done smartly,” the official said.
India has a patchy track record in negotiating trade pacts with developed nations. However, a deal with the US is too big to miss. Enhanced access for labour-intensive exports could generate jobs, while deeper integration in the services sector could strengthen India’s IT industry. But to achieve that, India may be forced to cut its protections.
Last week, China had accused the US of resorting to “unilateralism and economic hegemony”, thereby undermining the multilateral trading system centred around the WTO. The imposition of Section 301 tariffs, China said, is a prime example of such unilateral practices.
“The US Section 301 tariff measures are a classic case of unilateralism and protectionism. They seriously damage the global trade order and the security and stability of global industrial and supply chains,” a Chinese white paper stated.
Notably, Section 301 is a legal tool that allows the US administration to unilaterally investigate and act against what it perceives as unfair trade practices by other countries. Under this mechanism, the US had earlier revoked India’s Generalised System of Preferences (GSP) benefits.
“In April 2018, China brought a case concerning the US tariff measures to the WTO’s dispute settlement mechanism. On September 15, 2020, a WTO panel ruled that the US tariffs imposed on certain Chinese products violated the Most Favoured Nation obligation under Article I of the General Agreement on Tariffs and Trade (GATT), 1994. This ruling fully upheld China’s claims. The US filed an appeal on October 26, 2020. However, due to US obstruction, the WTO Appellate Body remains paralysed, leaving the case in limbo,” the paper said.
