India and the US are negotiating on two tracks to resolve their trade stand-off, and the first one will likely address the 50% additional tariff on Indian exports by December-end, Commerce Secretary Rajesh Agrawal said on Friday.
The second line of negotiations is for concluding the first tranche of the Bilateral Trade Agreement (BTA). The secretary indicated that this could only follow the trade deal that could ease the tariff burden on India.
Two-Track Strategy
Not just the punitive 25% impost attributed to Russian oil imports, but even the 25% additional reciprocal tariff is expected to be part of the trade deal.
Analysts feel the deal that may precede the signing of the initial part of the comprehensive BTA, may include a give-and-take. India has already reduced the fresh purchases of Russian oil. This is reflected in a marked reduction in India-bound fresh loadings of Urals. India has also signed long-term LPG purchase contracts with the US recently. On Friday, the defense ministry announced a Rs 7,900 crore deal with the US for MH-60R Navy Helicopter Support.
It was the BTA that India and US had agreed to enter into on February 13 till 25% reciprocal tariffs and then another 25% penal tariffs on India for buying Russian oil were announced. The initial deadline for the first tranche of the BTA was fall of 2025.
“There are two separate negotiations going on. One will feed into the other. What needs to come first is a framework trade deal which is able to address the reciprocal tariffs,” Agrawal said at the Ficci AGM.
“At the level of negotiators I think we are in a zone from where we can say it is something we can achieve in a very short time. There is not much left to negotiate. There are very few issues on which political call needs to be taken,” he added. Agrawal is the chief negotiator in the trade negotiations
“We need to find a complete pathway for complete elimination of reciprocal tariffs in our process of doing BTA. We will not hurry up. We are working on various aspects of BTA. Let the first one come first,” he added. The understanding is that the trade deal will be beneficial for Indian exporters only when there is redressal of both 25% tariffs, he noted.
Negotiation Status and Non-Negotiable Sectors
Despite the pressure of tariffs, the Commerce Secretary said India has stood its ground on the sensitive sectors and areas that “are non-negotiable from our perspective”.
“It (BTA) will take a lot of time especially with the changed dynamics. Trade agreements are very wide-ranging agreements these days. We are working on various aspects of BTA. Let the first one (framework agreement) come first,” he added.
The last round of physical meetings for a trade deal between the two sides were held in October. It was the sixth round of talks between the two sides. The first one in March had finalised the Terms of Reference (ToR) of the BTA. Now both sides are engaged virtually with talks happening almost every week on some or the other issue of the agreement. More visits can happen either way, the secretary said.
He said despite the tariff issue, there is a lot of positivity among the businesses on both sides and in the first six months of this financial year, India’s exports to the US are up $ 10 billion in value terms.
The sectors like marine products that were expected to come under pressure as 30% of their exports go to the US, have shown a growth of 15% in that market. “Some sectors that have come under stress in the US have found new markets elsewhere. We are exporting more marine products to the EU now. We are doing 60% higher than this year in the EU.”
He said that the FTA with the European Union (EU) could be finalised in the first quarter of next year or even earlier. “It is the biggest and most difficult FTA we are negotiating. But over the last 3 years a lot of work has been done. I can say we are in the last phase of negotiations – most arduous and most difficult. This last phase started 2-3 months back. There is energy on both sides trying to arrive at a deal as early as possible. “We are in a good zone.”