Full India-US trade pact may take time; govt awaits clarity on Trump's policy
India-US trade deal (Representative AI image)
NEW DELHI: While India and the US work towards finalising an "initial tranche" of the proposed trade deal before July 9, the full bilateral trade agreement may take a few months as the Trump administration is yet to spell out its policy on trade, beyond using tariffs to get countries on the negotiating table.
A long-lasting agreement will require the US to move beyond a case-by-case approach, which can form the basis for a durable agreement, sources said. Besides, there are issues, such as how the tariff cuts committed by the US Trade Representative will be implemented, as there is no clarity on whether the reduction will need to be cleared by the US Congress. Already, the legal challenge to Trump's reciprocal tariffs has created some uncertainty on how the duties cuts will be negotiated.
After a meeting between PM Modi and Trump in Feb, the two countries had agreed to negotiate a bilateral trade deal by Fall (Sept-Oct), before the US President decided to roll out reciprocal tariffs on April 2, only to suspend it later.
Even the deal that the Trump administration has managed to negotiate with the UK and China are not final agreements but are in the nature of interim trade agreements, given the repeated flip-flops.
These also include the American president focusing on certain sectors. For instance, while successive US administrations have made a case for lower duty for Harley Davidson (although it uses its Asia plant to ship superbikes), the push to lower duties for cars was seen in the context of Tesla boss Elon Musk's close ties with Trump, until the bitter fallout last week.
While negotiating the agreement with the US, govt has some key factors in mind: One, it wants to secure the best possible deal for its businesses so that they can get market access in return for lower duties in India.
Sources have argued that an agreement will give American companies access to a market of close to 1.5 billion people.
Two, govt is keeping a close eye on how the tariffs are being reset for other countries as competitiveness is a key parameter for Indian exporters. Unlike some of the countries, which offer dollops of subsidy for their businesses, govt only provides refunds of actual taxes and duties. Three, govt is keen to ensure that its sensitivities in several segments, such as agriculture, in segments like staples are fully on board.
In any case, the current negotiations are focused on goods trade, along with trade facilitation & customs and rules or origin, with India's interests in services not getting addressed at the moment.
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