Opinion India should use Trump’s tariff reprieve to finalise deals with US, EU, UK

Now that US President Donald Trump has paused the implementation of his full “reciprocal tariffs” — goods exported from India will now attract only 10 per cent and not the earlier declared 26 per cent duty — it opens up valuable time for the Narendra Modi government to push through bilateral trade agreements (BTA), not only with the US, but also the European Union and the United Kingdom. External Affairs Minister S Jaishankar has signalled as much, saying that Indian negotiators are “really charged up” and trying to communicate to all three sides the “urgency” to conclude trade deals. The plan of action seems to be to use the 90-day pause period effectively and firm up a BTA with the US by this fall (September-October). Simultaneously, trade discussions would be expedited to clinch pacts with the EU and UK.

If these talks come to fruition, it will have more than symbolic significance. The three countries/blocs together accounted for 38.1 per cent of India’s merchandise exports and 16.5 per cent of its imports in 2023-24. India, moreover, runs trade surpluses with each of the three — unlike with China, the ASEAN region or the likes of Korea, Japan, Hong Kong, Taiwan or Australia. India can, to that extent, negotiate BTAs more confidently with the US, EU and UK than with the latter countries. The gains from trade would be all the more if services are included. In fact, India must pitch for reducing barriers to trade in services — which translates into improved market access for its IT professionals and skilled workers, among others — in ongoing as well as future agreements, whether multilateral or bilateral. For the moment, the focus should be to finalise deals with the three countries/blocs, ideally covering both goods and services, at the earliest. Doing so would send out a clear message that India means, and is ready to do, business.

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The current trade talks should extend beyond lowering tariffs to also easing non-tariff barriers (NTB). The EU’s proposed carbon border tax on imports — supposedly to penalise emissions generated during their production — or incorporation of environmental, labour and human rights into trade negotiations are clear instances of such NTBs. India is equally guilty of issuing so-called quality control orders — requiring imported goods, from chemicals and manmade fibres to cement and electronic devices, to have mandatory Bureau of Indian Standards certification — and not allowing dairy products to enter without proof of their being derived from animals that have not consumed feed containing internal organs, blood meal or tissues of ruminant/porcine origin. Such non-transparent and burdensome requirements, neither aligned to international standards nor having any scientific or discernible safety justification, have no place in fair trade between countries that are market- and rule-based economies.