American companies hold up ambitious India-US trade agreement
Squabbling among US private sector entities is understood to be one of the the key factors holding up an India-US trade deal that could lead to the opening up of the agriculture sectors of the two countries on a reciprocal basis and an ambitious Free Trade Agreement (FTA) between them, according to people familiar with the discussions.
Talks are currently underway towards an “interim” deal in the near-term and an FTA over a longer term, with India agreeing to open up portions of its agricultural sector in exchange for partial restoration of its benefits under a zero-tariff preferential US trade programme. As part of these negotiations the United States is also understood to have have dropped its demand for access to India’s dairy sector, a particularly vexatious issue given religious sensibilities in India to dairy products derived from cattle reared on animal feed.
A deal was expected to be signed by US President Donald Trump and Prime Minister Narendra Modi at their bilateral meeting in New York on the margins of the UNGA meetings. But it wasn’t and there was a view that India might have been behind it, given its history of muddled opportunities.
The dispute, according to those people, is between Indian branches and their US headquarters. While the Indian entities are willing to settle for reduced but nominal tariffs of 5% on ICT products, their American headquarters are pushing for “zero tariff” in a bid to leverage White House’s intervention to the fullest, it was said,
On medical devices such as heart stents and knee-cap implants, a US market leader is in dispute with the industry’s representative association on “trade margins at first point of sale”, a key issue in a heavily price-regulated market.
Even if these differences were sorted out, the deal is understood to be still “some months from being wrapped up” and would require at least one more meeting of the principals, Unions commerce minister Piyush Goyal and the US trade representative Robert Lighthizer.
Negotiations are currently focussed on an “interim deal” in the near term which is likely to be “reasonably sizable” in scope, and a long-term and more ambitious Free Trade Agreement, with the former expected to address tariff and market access issues that have been of most immediate concern, said the people familiar with the talks.
The two-track negotiations were first revealed by President Donald Trump in remarks to reporters before his bilateral meeting with Prime Minister Narendra Modi on the sidelines of the UN General Assembly meetings in New York in September,. “We’ll have the larger deal down the road (in) a little bit, but we will have a trade deal very soon,” he had said.
Largely overlooked at the time in the excitement over Trump-Modi and Trump-Imran Khan talks, officials from both sides have since acknowledged the two-track talks but have refused to publicly discuss details until now, specially the efforts focussed on the longer-term goal of an FTA, which typically paves the way for low tariffs and enhanced market access on a reciprocal basis between signatories. Both India and the US separately have multiple bilateral and multilateral FTAs.
“An FTA is very much on the table,” said Mukesh Aghi, head of the US-India Strategic Partnership Forum, an advocacy group that has been at the forefront of promoting ties between the two countries in commercial and security sectors. Aghi has long argued for India and the US to sign an FTA.
Another key element of the negotiations that has remained under the radar is India’s offer to open up its agriculture sector “entirely” in exchange for parties restoration of its benefits under Generalized System of Preferences (GSP), a zero-duty preferential trade system, lifting of tariff on its steel exports to the United States and settlement of all disputes at the World Trade Organization.
The extent of the agriculture sector that India is offering to open up could not be ascertained immediately but the people familiar with the discussions insisted access under consideration is “limited” and “selective” and it will be done on the basis of reciprocity. “India will also gain access to the US farms sector,” one of them said, refusing to discuss details.
There are hopes among the more optimistic circles that these discussions could lead to an early resolution of differences that have lingered for decades and gotten progressively worse. And it was said that if a deal was ready to be signed, President Trump could travel to India to seal it in November.
But the people engaged in the talks discounted the possibility of Trump’s visit to India saying “it’s not on the cards for sure”.
Even if a presidential visit looked improbable at this time, there was new hoped of a deal based, among other things, on a growing perception among officials on both sides of an “excellent rapport” between the key negotiators, Goyal and Lighthizer. “They share an easy and growing relationship,” said a person who has spoke to them both about the talks.