US President Donald Trump’s visit on February 24 might set the stage for the initiation of a long-term trade pact with India going forward, starting possibly with an announcement of a limited trade package. However, “fundamental” differences and India’s increasingly protectionist stance may make an agreement difficult to finalise between the two countries anytime soon, say experts.
“We want to do something. We’ll see. If we can make the right deal, we’ll do it,” Trump told reporters in Washington after the visit was announced.
Experts, however, point to the prospect of a full-scale trade deal being inked during the upcoming visit as an uphill task.
“There are quite a few fundamental differences in trade between India and the US, including on standards and intellectual property. Agriculture is also a source of major difference — they (the US) give more subsidies in aggregate than we do, but the manner in which they do it is different,” said Rajat Kathuria, director and chief executive, ICRIER.
The concept of colour-coded boxes to identify subsidies are also not as useful to India as they are to developed countries like the US, and India will not be able to make any commitments on issues of data protection until its own regulations are in place, he said.
Symbolic gestures may be a good place to start
US President Donald Trump’s visit might pave the way for further discussions on the trade front, but the sticking points between India and the US seem far from being resolved at present. Symbolic announcements like doing away with tariffs on certain items like motorcycles might be a start, but the Modi government would also have to balance what it gives to the US with the interests of its voter base.
“These are divisive issues and, therefore, to arrive at a trade pact which is in some sense a meaningful scope is difficult to achieve. I think we will take baby steps,” said Kathuria, adding there might be some “low-hanging fruit” — demands that both sides could relent on as “symbolic” moves to signal their readiness for deeper economic commitment.
This includes reinstating duty-free benefits for certain Indian exports under the US’ Generalized System of Preferences (GSP) — a trade preference programme for developing countries, of which India was the largest beneficiary. India, on the other hand, could do away with customs duties on motorcycles, as high tariffs on Harley Davidson motorbikes have been specifically mentioned by Trump in the past, according to Kathuria.
At the same time, the office of the United States Trade Representative Monday classified India as a developed country, making it ineligible for its GSP programme.
This visit is a very special one and it will go a long way in further cementing India-USA friendship.
Despite reports of a limited trade package being in the final stages, there is little to no clarity on what it may contain. Some industry and trade sources told The Indian Express there was confusion over whether the two sides had reached a resolution over issues like the demand for greater access for American agriculture and dairy products, while others said India was unlikely to concede.
“In the recent past, India has shown its resolve in an international trade deal (RCEP) to protect the interests of its farmers and dairy industry. In the case of the Indo-US trade deal also, we expect the same resolve will get reflected,” Ashwani Mahajan, national co-convener of RSS-affiliated Swadeshi Jagran Manch, told The Indian Express.
“Going by the way India walked out of the RCEP deal at the last minute, and its decision to increase tariffs on a slew of items to protect its domestic industry, it is likely that the US will also be approaching a potential deal with extreme caution,” a source said.
While India has been working on a proposal to cap trade margins of medicines and medical devices sold here, a trade expert said it was unlikely the government would give in to US demands to do away with its previously announced ceiling price caps on lifesaving stents and essential knee implants. “The caps were announced and promoted in public interest, so the government cannot be seen as going back on them,” the expert said.
The newly announced health cess on imported medical devices could also be a negative for the US, as it is among the top three exporters of these categories of products to India, the expert added.
As far as a free trade agreement (FTA) between the countries is concerned, statements have been made by both sides that this was not happening at the moment. “I very much doubt that would occur this year,” US Commerce Secretary Wilbur Ross told Fox Business Network in January. Last week Commerce Minister Piyush Goyal told the Rajya Sabha India was presently not negotiating a comprehensive FTA with the US.
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