The India-US trade deal would be signed when Washington’s new tariff architecture is ready. In the meantime, both sides will remain engaged in fine-tuning other elements of the agreement reached in February, a senior official said Monday.
“Any deal that India finalises and signs has to be against the tariff structure or the comparative advantage that it gets in the US market,” the official, who did not wish to be named said.
The deal that was agreed between India and US in February reduced reciprocal tariffs on India to 18% from 25% and completely removed 25% penal tariffs imposed for buying Russian crude oil. The proposed reciprocal tariff of 18% gave India advantage over its key competitors like China, Vietnam, Indonesia and Bangladesh. “India would like to retain that advantage,” the official said.
What did commerce secratery say?
“India remains engaged with the US side for a mutually beneficial trade agreement,” Commerce Secretary Rajesh Agrawal said.
The deal came undone when the US Supreme Court invalidated the country-specific tariffs imposed through International Emergency Economic Powers Act (IEEPA) and were a basis of all the trade agreements the US was negotiating or finalised with its trade partners.
“The US is working on trying to recreate a tariff architecture globally. Once they are on that pathway, they are able to create that. I think that would be right to sign the deal,” the official said.
Other than the tariffs, the deal has many components including preferential access by India to US goods, addressing frictions like non-tariff barriers and purchase commitments.
“Both sides are engaged to finalise the finer details of the legal text of the agreement and engage regularly,” he said.
Current tariff structure
Immediately after the court’s ruling, the US imposed 10% additional duties on all imports under Section 122 of the Trade Act. These surcharges to address large and serious balance of payment deficits can be imposed only for 150 days and their upper limit is 15%.
Before the expiry of the 150-day window, the US has initiated a probe into the policies of its major trade partners including India, European Union and 14 other countries that enable excess capacities in some manufacturing sectors and hurt the US.
Another probe was launched by the US under the Section 301 (b) of the Trade Act, it has also opened another set of investigations to determine whether acts, policies, and practices of its trade partners related to the failure to impose and effectively enforce a ban on the importation of goods produced with forced labour are unreasonable or discriminatory and burden or restrict US commerce.
This second investigation under the Trade Act will cover 60 economies, including India, Canada, China, Japan, Australia, Bangladesh and Pakistan.
Though the investigations under Section 301 take 12-18 months, the US government is expected to expedite it and through it maintain extra tariffs that would expire on July 24 this year.