A “limited” trade deal between India and the US, which was on the verge of conclusion before the US Presidential polls last month, is unlikely to see the light of the day at least before the second half of 2021, a source told FE.
The deal was expected to cover an annual goods trade of about $13 billion, or roughly 15% of the bilateral shipments (in FY20). “With Joseph Biden at the helm of affairs in the US, there would be a fresh review of the deal. It may be pushed back to the second half of the next year, or even further,” the source said.
“However, the good thing is that the scope of the deal can be expanded in this process to include more products,” he added. Despite differences over offers, both India and the US negotiated the mini deal for months, before the American election purportedly slowed down the process. The US was the largest single market for India, with goods exports worth $89 billion in FY20. This deal was expected to be followed up with talks for a free trade agreement (FTA).
At an event this month, US Trade Representative Robert Lighthizer said while both the sides were not far away from the mini deal, “keeping in mind obviously we have a political change going on over here… that is going to be a bit of a set back”. “…there is going to be some change and my guess is that it will slow things up,” he added.
FE had first reported on November 18 that the deal would be delayed, as the new administration could review even the settled issues.
Under the “limited” deal, India has been pushing the US for a complete restoration of duty benefits for it under the so-called Generalised System of Preferences (GSP). This will mean duty-free Indian exports of $6-6.5 billion a year (but the potential tariff forgone by the US was only $240 million in 2018).
However, the US wanted India to import farm and dairy products of equivalent amount ($6-6.5 billion) to restore the GSP benefits. New Delhi was willing to grant greater access in farm items, including cherries, alfalfa hay and pork, but was reluctant to pledge farm/dairy imports in such high volumes without reciprocity. Instead, it wanted to buy other American goods, mainly oil and manufactured products.
Also, as sources had earlier told FE, India might consider opening up its dairy and poultry sectors partially if it got a good deal from the US in textiles and garment and pharmaceuticals. In garments, for instance, the US import duties for India currently range between as much as 16.5% and 32%.
India is learnt to have offered to reduce tariffs on high-end bikes like Harley Davidson and sweeten its initial offer on easing price caps in medical equipment. India was also willing to resolve certain non-tariff measures, such as certification process for some dairy products.
However, the US was still unimpressed and its focus of negotiations, before the American election, increasingly shifted to selling more farm goods to India.
For its part, New Delhi has been critical of stringent US patent protection laws and various steps by the Food and Drug Administration (FDA), which have dented India’s exports of pharmaceutical products. This is among the important non-tariff barriers that India wants the US to remove.
In September, commerce and industry minister Piyush Goyal had said Lighthizer and he had agreed that “we can look to finalising (the limited deal) before the (US) election, or otherwise soon after the election”.
The importance of an India-US FTA, or at least this limited deal, has grown after the conclusion of the China-dominated RCEP pact in November. India pulled out of the RCEP talks, as it believed no deal was better than a raw deal.