India, US fail to seal trade deal over differences on import duties

Differences over reduction in import duties on high-value US smartphones and gadgets have held up efforts by India and the US to finalise a trade package, said officials. However, both sides have continued to discuss issues and trade negotiators are hoping for a breakthrough by Thursday, they added. “Commerce and Industry Minister Piyush Goyal, along with Commerce Secretary Anup Wadhawan and other trade department officials, are in the US,” said the officials.
 
Prime Minister Narendra Modi will have a number of bilateral meetings on Thursday, one of which may see him sit with US President Donald Trump again. Addressing the press on Tuesday, Trump had promised a trade deal with India “very soon”, with a larger deal down the line. However, Modi has not commented so far.
 
ICT hurdle
 
The US wants India to reduce import duties on certain information and communication technology (ICT) products, such as high-end mobile phones and smartwatches, which may make iPhone products cheaper.
 
While New Delhi had earlier considered the proposal, talks have been made difficult on the quantum of reduction demanded, the officials said.
 
ICT products make up a minuscule $407 million, out of the $35.54 billion of total inbound shipments from the US, as of now. However, US Commerce Department officials have zeroed in on the category as a prime growth puller.
 
Major corporations such as Apple have also thrown their weight behind the move, arguing that India is a major market for consumer electronics. The overall import of electrical machines in all forms from the US stood at $1.8 billion in FY19, slightly up from $1.75 billion in the year before.
 
India has tried to reduce its exposure to foreign products for electronics imports, which, at $52 billion, is the third-largest on the country’s import bill. The government’s phased manufacturing program has targeted reducing the import of technology products over the next five years.
 
FTA or not?
 
The US continues to pressurise India on a full-fledged free trade agreement (FTA), since a year, but New Delhi has consistently resisted. Commerce Department officials have argued that India stands to gain little from such a pact, given import duties for goods coming from the US are already among the lowest globally.
 
India wants a mutually acceptable ‘trade package’ that provides an amicable solution to major grievances, according to a senior trade negotiator. India may consider dismantling the current price cap regime for coronary stents, with a trade margin policy. It may also lower duties on certain ICT imports.
 
In return, the US has offered to step back from its aggressive posturing on ‘reciprocal taxes’. Trump has repeatedly accused India of being a ‘high tariff nation’, referring to duties placed on Harley Davidson motorcycles.
 
The India-US trade talks had run the risk of falling through after the US had, earlier this year, cut off India’s duty-free access to the US market under the Generalized System of Preferences (GSP).
 
Subsequently, India had raised import duties on key high-value imports from the US, mostly on agricultural products such as apples and almonds. The reinstatement of GSP benefits is a key demand from the Indian side, according to people in the know.