No new tariffs after Bilateral Trade Agreement: India wants US assurance
India wants an assurance from the US that no additional tariffs will be imposed by the Donald Trump administration once the bilateral trade agreement (BTA) is finalised, said people familiar with the matter. The deal is in the final stages of negotiation and both sides are hopeful of reaching accord quickly. India has sought concessions for labour-intensive sectors such as leather and textiles. 'We have put everything on the table,' said one of the persons, adding that India wants stability in tariffs once a deal is rolled out.
Trade agreements typically include renegotiation clauses, or compensation from the partner effecting a tariff increase. India would like the pact to provide for such a mechanism. 'This would ensure the agreement is ring-fenced from prospective changes,' said another person. The US President on April 2 announced a reciprocal tariff of 26% on goods imports from India as part of its trade levies all over the world.
These tariffs were paused for 90 days until July 9. However, the baseline tariff of 10% remains in force. India and the US are looking to finalise the BTA ahead of the deadline.
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Timebound BTA Needed
An assurance from Washington is required to ensure tariffs negotiated within the framework of the trade deal remain ring-fenced from any changes effected later by the US, said a third official detailing India's concern. There is also Trump's mercurial nature.
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Independent experts are agreed on the need for such a clause. 'The BTA should be timebound and not in perpetuity,' said an expert on trade issues. 'India must insist on a clawback provision — that it will withdraw benefits if the US raises tariffs or goes back on any of its commitments.'
Negotiations
Officials said Washington has to find a way to reduce tariffs as New Delhi has sought concessions for sectors such as textiles and leather, as mentioned above. The Trump administration currently requires approval from the US Congress to lower levy below most favoured nation (MFN) rates, but it does have the authority to scrap reciprocal tariffs.
'We want preferential and sustained trade advantages and have left it to the US to decide the route it takes to reduce its tariff barriers—whether through the Trade Promotion Authority or by seeking Congressional approval,' said one of the officials cited earlier. The government is also monitoring the impact of the 50% tariffs on steel and aluminium and the 25% tariffs on auto. While the auto components sector doesn't expect a big dent for now, there may be an impact if the tariffs persist. According to the official quoted, India will pursue a concession, if others get one.
Early Harvest
Both sides have had several rounds of discussions on the proposed trade deal and are hopeful of concluding at least an early harvest deal. 'We are working on the early tranche, and there is a date (July 9), before which we would like to conclude this. The progress is good,' commerce secretary Sunil Barthwal said on Monday.
A US trade team is in India last week to firm up the contours. India has made it clear that any meaningful expansion in bilateral trade will require a significant reduction in US tariffs. Both sides aim to more than double such trade to $500 billion by 2030.
However, a Delhi-based trade expert cautioned, 'India should rethink its proposed BTA with the US. The US has a history of incomplete trade deals, such as the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership. It has retracted its WTO commitments also. Moreover, the future of the Indo-Pacific Economic Framework for Prosperity hangs in the balance with the US-China trade deal.'
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