Indo-US trade: Clouds hang over deal during Donald Trump’s visit

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Updated: February 17, 2020 8:07:50 AM

Last month, commerce and industry minister Piyush Goyal had held a meeting with Lighthizer in Davos, where both are learnt to have discussed the deal.

The 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 had then stalled it. (File image)The 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 had then stalled it. (File image)

Persisting differences on sticky issues — including Washington’s demand for greater access to agricuture, dairy and ICT products, have cast a shadow over the prospect of a limited trade deal being signed during US President Donald Trump’s two-day visit to the country, starting February 24.

Fresh speculations about disagreements have gathered pace, as US trade representative Robert Lighthizer, who was widely expected to come before Trump to finalise the broad contours of the deal, hasn’t landed here yet, with no clarity on his arrival. Importantly, the US last week reportedly changed a key exemption to its trade remedy laws to make it easier to penalise about two dozen developing countries, including India and China, in the latest move to underscore its anxieties over New Delhi’s trade policies.

While the quantum of incentives involved in the deal is unclear, it was initially expected to cover products with a total bilateral trade of over $10 billion. The 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 had then stalled it.

Both the countries haven’t yet reached a consensus on the US demand that India scrap an up to 20% duty on seven ICT products, including mobile phones worth over Rs 10,000 and smart watches. Nevertheless, India has strived to narrow the stark differences through hard negotiations over the months. New Delhi has already conveyed that while 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, 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.

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 stockiest), 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.

Last month, commerce and industry minister Piyush Goyal had held a meeting with Lighthizer in Davos, where both are learnt to have discussed the deal.

For its part, India is pitching for an exemption from the extra duty imposed by the US on steel (25%) and aluminium (10%) and a complete restoration of duty-free export benefits for some Indian goods under the so-called Generalised System of Preferences (GSP). 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.

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