India to go slow on trade deal with US, both sides to work on wider FTA

Prime Minister Narendra Modi with US President Donald Trump at meeting at the Hyderabad House in New Delhi, Tuesday
After the euphoria over US President Donald Trump’s visit died down amid no clear deadline for concluding a trade deal, India is now aiming to go slow on the negotiations front. 

But rather than planning a limited trade pact, both sides now want to create a comprehensive free-trade agreement (FTA) which will be wider in scope. Senior officials said both nations have agreed to go back to the drawing board and prepare better concession offers on most issues. They include medical devices, agriculture and high-value tech goods. 

Talks with India’s second-largest trade partner will be reset on trade concepts such as export incentives under America’s Generalized System of Preferences (GSP) scheme and reciprocal tariffs on a wide range of sectors.

On Tuesday, Trump had said a comprehensive trade agreement with India would take much longer to finalise than earlier expected. He added it was unlikely before the year-end. 

Now, after the relative failure of two high-profile visits by both Prime Minister Narendra Modi and Trump to end trade animosities, the government wants to take time to prepare a better negotiating platform, another official said. “The deal did not happen because core demands were not met on both sides. We now need to get back to the drawing board,” a senior official said. 

However, Delhi will soon engage with Washington DC to finalise the next spate of visits by trade officials. Senior government officials continue to hold US Trade Representative Robert Lighthizer’s decision to suddenly cancel his visit to New Delhi as responsible for the deal not taking off. 

 
Lighthizer, considered Trump’s point man on trade, was expected to arrive in India as part of the President’s vanguard team to flesh out any proposed deal. While his office has not given any official statement on why he wasn’t present this time around, diplomatic sources said Lighthizer did not want to lend his name to a deal which was half finished.

Lighthizer was responsible for shutting down the vast majority of India’s export promotion schemes last year after a sustained battle at the World Trade Organization.

Officials confirmed that India had offered to sign a smaller pact, focusing on agriculture goods. “Talks on agri tariffs were open for the longest time. It was suggested that a limited trade cooperation pact, arising out of these, be included in the joint statement by both the leaders,” a commerce department official said.

This would have seen India systematically rolling back duties on high-value farm imports such as almonds, walnut, apples, and wine. These were among the 29 items on which the government had hiked duties by up to 50 per cent last year, he added. 

American farmers have lost their prime foreign markets after nations retaliated to Trump’s unilateral tariff hikes by making it equally expensive to buy American products. New Delhi’s biggest demand — the reinstatement of trade benefits under the US’ GSP scheme — has been rebuffed by US officials. “They made their position clear last week by classifying India as a developed economy, which we don’t support,” said a senior trade department official.


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