Donald Trump’s Feb visit: Limited India-US deal on trade in the offing

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Updated: January 30, 2020 2:25:17 AM

Commerce and industry minister Piyush Goyal held a meeting with US trade representative Robert Lighthizer last week at Davos, where both are learnt to have discussed contours of the trade deal.

While the quantum of incentives involved in the deal is unclear, it could cover products with total annual bilateral trade of around $10 billion.

After months of hard negotiations, India and the US have moved closer to a trade deal that will include New Delhi’s commitment to extend greater market access in medical devices and agriculture. But an agreement on Washington’s demand for a sharp cut in or abolition of import duties on seven ICT products, including mobile phones worth over Rs 10,000, is still elusive, a source told FE. So a ‘limited deal’ could be signed during US President Donald Trump’s expected visit to India in February, just three months after New Delhi pulled out of the Beijing-dominated RCEP trade pact.

While the quantum of incentives involved in the deal is unclear, it could cover products with total annual bilateral trade of around $10 billion. A limited deal was supposed to be signed during Prime Minister Narendra Modi’s visit to the US in September last year but a lack of consensus stalled it. A broader trade deal could be hammered out later, said the source.

As for ICT products, New Delhi has already conveyed that an across-the-board cut of import duties on the seven items would cost it a massive $3.2 billion a year and help only third parties (like China and Korea) that supply more; instead, it is willing to lower duties on those ICT products where it would benefit the US. The US made up for only 2% of the Indian imports of the seven products in FY18.

For its part, India is pitching for an exemption from the extra duty imposed by the US on steel (25%) and aluminium (10%), the resumption of duty-free export benefits for some Indian goods under the so-called Generalised System of Preferences (GSP) and greater market access for its products in sectors ranging from agriculture and automobiles to engineering. The US, however, had been offering to restore the GSP benefits for India — which stood at $240 million in 2018 — only partially, a source had said earlier.

As part of the initial deal, India is learnt to have agreed to sweeten its offer on the price control regime for medical devices and apply trade margin on coronary stents and knee implants at the first point of sale (price to stockist), instead of imposing it on the landed prices, as was planned earlier. The move could help American medical equipment makers like Abbott Laboratories and Boston Scientific Corp.

India had also offered to simplify certain certification procedures for dairy imports from the US. Washington is also interested in better access to the Indian market in civil aviation, oil and gas, education service and agriculture in the medium term (over three-five years).

Commerce and industry minister Piyush Goyal held a meeting with US trade representative Robert Lighthizer last week at Davos, where both are learnt to have discussed contours of the trade deal.

A larger trade agreement with the US could be clinched later when both the sides reach a consensus on stickier issues, including the reduction of what the US calls “not justified” Indian tariffs on ICT products (20%), motorcycles (50%), automobiles (60%) and alcoholic beverages (150%), among others, according to the source.

New Delhi wants the Trump administration to recognise that India is the only large economy whose goods trade surplus with the US has been shrinking (unlike China’s). In fact, in 2018, the surplus shrank $4 billion from the previous year. Its exports to the US touched $52.4 billion in 2018-19, while imports were to the tune of $35.5 billion.

Also, India will remain one of the world’s fastest-growing large economy in the coming years, generating opportunities for US businesses in sectors ranging from defence and retail to oil. India is also a thriving market for US services and e-commerce companies like Amazon, Uber, Google and Facebook with billions of dollars of revenue.

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