A long-pending India-US trade pact will be high on US President Donald Trump’s agenda during his likely visit to New Delhi next month but any agreement between the two countries in the area could be much lower in ambition than initially visualised because of niggling differences in key areas, say officials.
“The US has a wish-list ranging from no price caps on medical equipment and greater market access for dairy products to zero import duties on mobile phones and high-end IT products and lower tariffs on farm goods. India, on the other hand, wants full restoration of Generalised System of Preferences (GSP) benefits for its exporters, greater export of agriculture produce and a roll-back of penal duties on its steel and aluminium. But both sides are bargaining hard and the final agreement may not be a very attractive package,” an official close to the development told BusinessLine .
A team of US trade officials is scheduled to come to New Delhi later this week to sort out thorny issues with their Indian counterparts, while US Trade Representative Robert Lighthizer is likely to visit India around February 10, the official added. The two sides will minutely examine if a trade pact could at all be announced during Trump’s visit, tentatively scheduled for February.
In fact, many in the government say that Trump’s visit to India got delayed because of no break-through in the trade deal following Modi’s visit in September 2019.
“The Trump regime was very disappointed that the trade deal could not be announced during Modi’s visit to the US despite a last-minute push by both sides to put together a package. This time both countries may be more accommodating and let go of many of their demands,” the official said.
One of the major demands from the US in the proposed pact is the dismantling of all price caps on medical devices in India as the American industry had been complaining about profits being hit. A big compromise for the US would be agreeing to India’s insistence on capping and rationalising trade margins in medical devices, even if New Delhi relents to Washington’s demand of removing price caps for manufacturers.
India is also not willing to bring down import duties on all mobile phones as pushed for by the US; it has been offering lower tariffs only on high-value phones, and not across the board. Trump’s demand that import duties on high-end bikes, including Harley Davidson, be brought down to zero per cent, is another area of contention. Some paring of duties is however, expected.
As for farm goods, New Delhi may agree to roll back some of the retaliatory duties imposed on items like apples, almonds and walnuts but Washington’s demand of removing labelling restrictions on dairy products citing religious sensitivities and increasing market access for pulses, too, may be ruled out. Higher market access for pulses could also be denied.
Washington, on the other hand, may not restore GSP benefits on all Indian products despite the fact that removal of the benefits last year affected Indian exports to the US worth $6.3billion annually.
The US may also not roll back the higher duties imposed on Indian steel and aluminium on grounds of security concerns. These duties were actually aimed at punishing India for having a trade surplus with the US.
With India buying more items from the US, especially oil and gas, the trade gap has already narrowed by 9 per cent to $20.8billion in 2018, according to USTR figures.