Galwan stand-off: India takes another shot at free trade deal with US

The GSP is America’s oldest preferential trade scheme, which offered Indian exporters tariff-free access to the US until June 2019, when all benefits were suspended
As India distances itself from China following the clash in Ladakh between soldiers of the two countries, the Centre is keen to have another go at negotiating the India-US free trade agreement, Business Standard has learnt.

This, officials say, can lead to an effective trading bloc against the China-led Regional Comprehensive Economic Partnership.

The same officials, in the finance and commerce ministries, say the government is being realistic, and because of the Covid-19 pandemic and the upcoming US presidential election in November, the business end of the negotiations will happen only next year, though work is likely to begin now.

“The current situation is that non-alignment is not an option, and the RCEP is out of the question for us. The recent clashes have given us a clear choice on matters of trade and commerce, and that is to go with the US to counter China,” a senior government official said, adding that discussion on the matter had begun with the US.

“We have been here before, and we will not be seen as desperate. We are going back to the negotiating table in good faith,” a second official said.

Late on Thursday, the US hinted it was open to restoring trade benefits under its Generalised System of Preferences (GSP) to India if it got a “counterbalancing proposal”. 
Reinstating GSP benefits has remained a key demand of New Delhi but in February, the US had classified India as a developed economy, ineligible for benefits given to developing countries.

Now, US Trade Representative Robert Lighthizer, Trump’s point man on trade, has told members of the US Senate Finance Committee that trade talks with India were on.

According to officials, India’s next proposal for trade talks with the US includes a step-by-step reduction in import duties on high-value US agricultural products, a trade margin policy for medical devices, and a promise to continue talks on reducing price restrictions on American tech goods.

India’s proposal will also be predicated on the US pulling back from its tough stance on taxes on digital services imposed by India.

The GSP is America’s oldest preferential trade scheme, which offered Indian exporters tariff-free access to the country until June 2019, when all benefits were suspended. 

While India earlier stated it would not pursue GSP benefits further, sources say the position is expected to change.

India’s benefits from GSP tariff exemptions amounted to $260 million in 2018, according to the data from the Office of the United States Trade Representative. 

However, this was only a small portion of India’s exports to the US in the same period, which stood at $51.4 billion.


Officials haven’t heard much from Lighthizer since he cancelled his visit to India in February as part of Trump’s team. Now, they say talks are set to begin soon. However, they have cautioned that details will need time to straighten out, given the ongoing pandemic, the upcoming presidential election in the US, and the fact that both nations have been at this particular juncture in talks before as well.

The US wants India to slash its tariff rates and further open up its markets to American products. Trade talks have oscillated on these issues over the past two years. The differences had remained too large to bridge despite a push by both leaders. 

Sources confirmed that talks had started at a frenzied pace just before the Howdy Modi event in Houston, Texas, in September last year as well as the Namaste Trump event in Ahmedabad in February.



Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel