Importance of Indo – US Trade Deal
With the decreasing role of WTO, as major countries are moving away from Globalization to Nationalism, it has increasingly become important for India to have mutually beneficial trade deals with friendly countries. India could make little progress with the European Union, Australia and New Zealand in recent past. India also backed out of the Regional Comprehensive Economic Partnership after seven year of pains taking negotiations, thus shutting the door to a large integrated market. In the backdrop of global economic slowdown, where India’s exports have fallen consistently, it is important for India to strengthen trade relations with large global markets like the US. President Donald Trump has ordered a very comprehensive review of US trade deficits. US trade deficit with India stood at 21 Billion dollars in 2017-18 as against 340 billion dollars with China. The US wants this to be resolved as we go ahead with a new deal.
There have been fundamental disagreements over tariffs (duties on imports from US). US wants India to strengthen patent regulations and to ease limitations which American companies face in India.
Harley Davidson Tariffs
India had laid out a duty of 100% on American Harley Davidson motorbikes, when Donald Trump called out India as the ‘tariff king’. Government reduced it to 50% in 2018, but US still finds it exceptionally high. However, India is not really the market for high end motorbikes since it is beyond the affordability of ordinary Indians.
Steel Industry
The US imposed an additional tariff of 25% on steel and 10% on Aluminum in 2018. This brought down the share of steel imported from India to US from 3.3% to 2.5%. India challenged this decision in the WTO, without imposing any retaliatory duties but US removed India from the list of preferential access to American market.
Generalized System of Preferences (GSP) Axed
India had the advantage of the benefits under the scheme of GSP from America. The Trump administration decided to remove India from this list, which gave India an advantage of over 6 billion dollars of exports to the US from India. India is understood to have asked US to reinstate these benefits in the ongoing trade talks with US. This prompted India to impose retaliatory tariffs on a number of items imported from US like almonds, fresh apples, phosphoric acid etc.
Farm Sector and Medical Devices
The US has been demanding greater access to Indian farm and diary sector. In fact, protecting the diary and farm sector was one major reason why India walked out of the RCEP negotiations. Further India had put caps on medical devices like stents and artificial knee implants etc. due to unreasonably high profit margins. It is understood the India is now looking at the issue fresh by ensuring reduction in profit margins rather than capping the cost price.
Some Promise Ahead
While US is among India’s top trading partner for goods, India is its eighth largest. President Trump has said that he is saving a big trade deal for a later date, however something which can be done easily is to resume benefits to India under the GSP scheme and India doing away with duties on motorcycles.