Proposed India-US BTA: US may ask for more access to agri products, ethanol

"The US will ask for major concessions in dairy and agri products, ethanol and removal of price control on medical devices.'' a former senior commerce ministry official said

The United States (US) is likely to ask India for substantial market access in agriculture and dairy products, ethanol, and medical devices under the proposed bilateral trade agreement (BTA) that both countries have agreed to conclude in the next eight months.

 

“The US will ask for major concessions in dairy and agri products, ethanol, and removal of price control on medical devices. They will not be satisfied with the limited tariff cuts in motorcycles and bourbon whiskey. We should ask the US to bring down duty on labour-intensive products such as textiles, leather and gems and jewellery from 5-7 per cent to zero,” a former senior commerce ministry official said, who negotiated with the Donald Trump administration during the first term.

 

The official said from the nomenclature of the proposed trade deal (first tranche, multi-sector BTA), it appears that both sides will look to conclude an early harvest agreement like between India and Australia.

 

In the latest National Trade Estimate Report on foreign trade barriers, the United States Trade Representative (USTR) said India maintains high applied tariffs on a range of goods, including vegetable oils (as high as 45 per cent); apples, corn, and motorcycles (50 per cent); automobiles and flowers (60 per cent); natural rubber (70 per cent); coffee, raisins, and walnuts (100 per cent); and alcoholic beverages (150 per cent).

 

“In addition, India maintains high basic customs duties (in some cases exceeding 20 per cent) on drug formulations, including life-saving drugs and finished medicines listed on the World Health Organization’s list of essential medicines. High tariff rates also present a significant barrier to trade in other agricultural goods and processed foods (poultry, potatoes, citrus, almonds, pecans, apples, grapes, canned peaches, chocolate, cookies, frozen french fries, and other prepared items used in fast-food restaurants),” it said in its 2024 report.  

 

In a factsheet released Friday, the White House pointed out that while the US average applied Most Favoured Nation (MFN) tariff on agricultural goods is 5 per cent, India’s average applied MFN tariff is 39 per cent.

 

MFN is the non-discriminatory tariff charged by a country to its trading partners unless a preferential free trade agreement exists between the two countries.

 

The report said India’s National Pharmaceutical Pricing Authority caps prices of coronary stents.

 

“US firms have raised concerns noting that price controls for cardiac stents do not differentiate on the cost of production or technological innovation, which dissuades them from serving the market,” it added.  

 

The USTR said despite ambitious targets for blending ethanol with gasoline, India prohibits the import of ethanol for fuel use.

 

“In addition, the DGFT restricts biofuel imports for nonfuel use to actual users. Since May 2019, the MOCI (Ministry of Commerce and Industry) required an import license for importing biofuels. The MOCI also requires that Indian importers obtain an import license from DGFT to import ethanol for non-fuel purposes,” it said.

 

RS Sodhi, president of the Indian Dairy Association, said dairy is a matter of livelihood for most farmers in India and hence one has to be very careful while reviewing duties.

 

“India has around 30-60 per cent import duty on most dairy products. While the US too has high duties, I don't think we need any dairy imports to India as our supplies are adequate,” he said.

 

Gokul Patnaik, former APEDA chairman and noted trade policy expert said the US farmers can keep their costs low as their farms are large and mostly mechanised.

 

“Our duty structure for agriculture items is designed in a manner that protects local production as in India production costs are high due to indirect expenses that our farmers face and their scale is also small. So tariffs in India are so designed that they protect our small farmers. If import duties are lowered, it will lead to flooding of items and impact our local production and march towards self-sufficiency,” he added.

 

Ajay Srivastava, founder of Global Trade Research Initiative said instead of pushing for a full free trade agreement with the US, India should pursue targeted agreements in technology, defence, energy, space, and supply chains.

 

“One potential area for collaboration is solar manufacturing. China currently dominates over 80 per cent of global solar cell production and 97 per cent of polysilicon supply, making the US and India dependent on imports. Setting up joint solar manufacturing in India could be a costly but strategic move to reduce reliance on China,” he added.