India-US trade negotiations enter the 11th hour

Live Mint

August 23, 2020

With the US and the European Union signing a mini trade deal on Friday, the focus has now shifted to the long-drawn trade package being negotiated by India and the US with a wafer-thin margin left for resolving the pending differences before the US elections in November.

In a small but significant breakthrough in trade relations, EU last week agreed to eliminate tariffs on American lobsters while the US will reduce duties on a range of European products such as glass crystal and cigarette lighters.

A limited trade package under negotiations between India and the US since 2018 is expected to cover tariff-related concessions for US farm products, especially dairy items, pricing of pharmaceutical products such as stents and knee implants, and information and communication technology products. In return, Washington is expected to restore benefits accorded to Indian exporters under the Generalized System of Preferences (GSP), which was terminated by Trump from 5 June last year. Both sides may also remove the tit-for-tat tariff hikes after the US raised steel and aluminium tariffs on grounds of national security.

In recent past, trade relation between the two sides has further deteriorated with the US suspending issue of fresh H1B visas in June and beginning investigation under Section 301 of its Trade Act on India’s digital services tax on foreign e-commerce companies last month.

A trade expert aware of negotiations between the two sides said, India in recent past has been pushing for withdrawal of trade restrictions imposed by each side in the limited trade deal under negotiations leaving substantial tariff negotiations for a later stage.

A second trade expert, who also also spoke under condition of anonymity, said post-coronavirus, India would find it difficult to yield on issues like tariff reduction on medical devices and farm products as they have become more sensitive matters now. “A deal between both sides at this stage looks very difficult as the focus of the Trump administration has shifted towards the upcoming Presidential election. There is little time now to resolve pending differences," he added.

India’s ambassador to the US Taranjit Singh Sandhu speaking at a webinar on Friday organized by industry lobby Ficci said India is waiting to hear from the US side on the limited trade deal under negotiations. “The real potential of our trade relationship is yet to be reached. The first step in realising this potential is to conclude the ongoing trade negotiations which would become the phase 1 of a comprehensive bilateral trade agreement," he added.

India’s trade minister Piyush Goyal last month had signaled that both sides are at the cusp of sealing the limited trade package. “I hope we will have a quick trade deal, which has some pending matters built up for the last couple of years, which we need to get out of the way quickly. We are almost there. I think another couple of calls and we can sort that out," he said at the India Ideas Summit organized by the US-India Business Council. His statement came soon after he held virtual meetings with US Trade Representative Robert Lighthizer and US commerce secretary Wilbur Ross though both sides did not release any joint statements about the meetings.

India’s exports to the US rose 1.3% in FY20 while imports grew 0.3% leading to a marginal increase in trade surplus to $17.4 billion during the year.

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