Even as Prime Minister Manmohan Singh endorsed a Free Trade Agreement between India and the US, negotiations on such a duty free deal will be challenging owing to sensitivities of both sides on issues like intellectual property rights and farm subsidies. Last year, a Bush administration official had rejected the possibility of a duty free deal with India.

?The US has very high expectations on compliance of intellectual property rights, which goes beyond the prevision of the TRIPS agreement,? said RS Ratna, professor, Indian Institute of Foreign Trade.

The biggest challenge for the proposed FTA will be the insistence of the United States to do away with the negative list, which contains items that will not see any duty cuts. On the other hand, the Indian policy is to include a negative list in the duty free deals, so that farm products and goods produced by labour intensive industries are protected from duty free imports. Items in a negative list do not see any duty cut.

It may be recalled that talks on the India-Asean FTA, which was inked in August this year, had stalled many times due to differences over the negative list.

Another contentious issue that will be a road block is the large subsidies that the US provides to its farmers and multinational corporations engaged in agriculture sector. The issue has become a bone of contention in the Doha round of world trade talks as well, with developing countries, including India, demanding a commitment from the US to bring down the level of farm subsidies. The move by India to partially cut duties of palm oil as part of its commitments in the Asean FTA has become a political potboiler in Kerala.

Susan Schwab, who served as the US trade representative in the Bush regime, said that it would be difficult for India and the US to get in to a free trade deal, owing to sensitivities in agriculture.

However, there are potential benefits from s duty free deal as well. ?The FTA could lead to better market access for Indian manufactured engineering products and goods of mass consumption. At the same time, we could have access to hi-tech goods made in the US,? said Manab Majumdar, assistant secretary-general, Federation of Indian Chambers of Commerce and Industry.

India has operational free trade deals with seven trading partners?Asean, South Korea, Sri Lanka, Singapore, Nepal, Bhutan, South Asian Free Trade Area. It is in the process of negotiating about 14 FTAs, which includes duty free deals with Japan and the European Union.

The US has 11 operational free trade agreements, which includes the North American Free Trade Agreement as well as duty free deals with its long-time ally Israel, Australia and Singapore.

In the back drop of the global economic crisis, exports from India to the US are declining due to decrease in demand for goods in the world?s largest economy. Latest figures suggest that Indian exports to the US declined 18.7% and stood at $10.44 billion in the first six months of 2009-10. US accounts for 11.4 % of Indian exports and nearly 7% of foreign direct investment inflows.

The two countries are often seen locking horns at the WTO. Disagreement between both the countries over a mechanism to protect developing and poor nations against sharp increase in farm imports was held responsible for the stalemate of the Doha Round talks in July, 2008.

Climate change

?We are determined to be part of the solution (for climate change). We will work for any solution that does not compromise the right of developing countries to develop and lift their populations out of poverty?

Weeks ahead of the Copenhagen summit, the Prime Minister has said India is ready to do more on climate change if developed nations offer financial resources and technology. India can commit to be part of a solution that does not compromise the rights of the developing countries, despite the fact that being a latecomer to industrialisation it has contributed very little to the accumulation of greenhouse gas emissions, Singh said while addressing a Washington-based council on foreign relations. India has already undertaken to do what it can with its own resources, and ? ?we will do more if there is global support in terms of financial resources and technology transfer,? he said. India recognises the need to act on climate change ?in our own interest?, since it is among the countries most impacted by the phenomenon.

Reforms on track

?Wherever I meet businessmen to talk of our plans for the future, the question I am most often asked is whether economic reforms will continue. You should have no doubt on that score?

The government rather plans to push ahead on key reforms in several areas including taxes, education, skill development and legal sector, though it might happen gradually through consensus, the Prime Minister said while allaying fears about any rollback of economic reforms. Singh said tax reforms, especially the introduction of a goods and services tax, are a very important part of his government?s agenda, along with financial sector reforms. ?We are also committed to major reforms in education and skill development. We have started a programme to raise resources by sale of equity in public sector enterprises. Legal reforms aimed at reducing delays are another priority,? Singh said.

Trade barriers

* Biggest challenge for proposed FTA will be US? insistence to do away with the negative list

* Indian includes a negative list in duty-free deals to protect its farm products

* Large subsidies for US farmers and MNCs engaged in agriculture could be hurdles

* Sensitivities in agriculture in could pose hurdles for the FTA

* US has very high expectations on compliance of intellectual property rights

* This goes beyond the prevision of the TRIPS agreement

* Indian exports to the US declined 18.7% at $10.44 billion in the first six months of 2009-10

* US accounts for 11.4 % of Indian exports and nearly 7% of FDI inflows

* The two countries are often seen locking horns at the WTO

* Disagreement over a mechanism to protect developing and poor nations against sharp increase in farm imports was responsible for the Doha talks stalemate in July, 2008