India waits for US response on mini trade deal of the kind signed with EU

New Delhi continues to push an early-harvest deal, to be followed up with detailed negotiations on a comprehensive Free Trade Agreement

While the US has signed a mini trade deal with the European Union to put to bed multiple contentious trade spats, the Donald Trump administration is yet to respond to India’s suggestion of signing a similar deal.

Commerce ministry officials say India  has confirmed its position that an early-harvest bilateral trade pact should be signed soon, to be followed up with detailed talks on a comprehensive Free Trade Agreement (FTA). However, talks have slowed as the Americans have not committed to a broad deadline and are yet to respond on key proposals.

A number of sudden demands by the US, such as the procurement of American dairy products and a more liberal data privacy policy, have lengthened the process. While the deal with Europe is valued only at $200 million, it is expected to provide respite to struggling American seafood farmers, who can now export lobsters duty free to Europe, while the US has reduced tariffs for a range of European products.

Since last year, India has proposed a similar deal. “But despite plans to keep it light, the proposed pact has become much bigger, with a significant payout for both nations. The US continued its dogged determination to secure lower tariffs and broad market access for a range of goods — many of which need lengthy separate discussions. Both still don’t see eye to eye on Indian plans for data localisaton and tariffs on American farm products, crucial demands from US industry before the November elections,” a Washington DC-based trade analyst said. 

Election fever

 

 

Last month, a tele-conversation between Commerce and Industry Minister Piyush Goyal and his US counterpart Wilbur Ross spurred hopes that a pact might be ready. Officials though said even back then that talks would only pick up only after the American presidential elections conclude in November.  But sources say the White House might accelerate the process given that President Donald Trump is under pressure to present something to the influential Indian American community, recently wooed by Democratic challenger Joe Biden’s Indian-origin running mate Kamala Harris. 

A step-by-step reduction of import duties on high-value US agri products, trade margin policy for medical devices, and a promise to continue talks on reducing price restrictions on American technology goods remains India’s basic proposal to the US. This is also conditional upon the US backing off from its tough stance on digital services taxes imposed by India. 

For its part, the US signalled that it was open to restoring trade benefits under its Generalised System of Preferences (GSP) scheme to India, provided it got a “counterbalancing proposal”. Reinstatement of GSP benefits has been a key demand of New Delhi, with India’s total benefits from GSP tariff exemptions amounting $260 million in 2018, according to the data from the Office of the US Trade Representative. However, this was only a small portion of India’s overall exports to the US in that period, which stood at $51.4 billion.