Trade deal with India not far-off, but there are still gaps: U.S. official

Washington DC

The U.S. and India are not “far off” from finalizing an interim trade deal, but need to bridge some negotiating gaps, such as over discussions on pulses and the staging of tariff reductions, according to a U.S. official.

“We’re not that far off from finalizing the interim trade deal, but some gaps remain,” the official told The Hindu in recent days.

Officials in Washington are working out the nitty-gritty of trade agreements following the U..S Supreme Court’s February 20 ruling that the International Emergency Economic Powers Act (IEEPA), which was the basis for President Donald Trump’s ‘reciprocal tariffs’, was unlawfully applied. The administration is now working towards re-establishing the reciprocal tariffs using other legislative tools, including ‘Special’ 301 trade investigations conducted by the Office of the U.S. Trade Representative’s (USTR).

One of the gaps in India-U.S. discussions, as per the U.S. official, is around pulses, with India seeking to safeguard the market for this agricultural commodity and the U.S. wanting greater access to it. Politically, agriculture is a deeply sensitive issue for both countries, with the administration in DC and government in New Delhi not singing from the same song sheet— or, more literally, ‘fact sheet’.

Last month, the White House put out a ‘fact sheet’– including the term “certain pulses” on a list of items that, it claimed, India would cut tariffs on. This and other discrepancies with the joint statement issued by Washington and New Delhi had created a political furore in India. The White House quietly reissued the ‘fact sheet’ – a political statement, rather than a statement of fact– this time omitting the reference to pulses and correcting certain other discrepancies.

However, the U.S. side still appears to be pushing for market access on pulses. Additionally, The Hindu has learned that Washington is seeking reduced staging (i.e., the speeding up of a phased reduction in tariffs) and this is currently one of the gaps in negotiating positions and is under discussion.

Conversations The Hindu has had in recent days suggest that right now, however, trade officials in Washington are not focused on closing the gaps in trade deals but are busy conducting Special 301 investigations launched in March against tens of countries, including India, ostensibly for excess capacity in manufacturing and forced labour.  

​Farmers’ pulse: On India and its demand for pulses

While the U.S. did sign a trade deal since the latest set of 301s was launched, this was with Ecuador, (on March 13), a country with an economy at least 30 times smaller than India and whose bilateral trade with the U.S. is a fraction of U..S-India bilateral trade.

These probes— which are conducted annually on different countries— will enable the imposition of tariffs on top of the universal tariff rate of 10% , imposed on February 24 using Section 122 of the U.S.’s Trade Act, following the Supreme Court ruling. Section 122 tariffs, applied temporarily when there is a balance of payments issue, can be applied for no more than 150 days and cannot exceed 15% as per law.

Mr. Trump had said in February that he would increase the universal 10% rate to 15%. However, this has not happened and officials in DC appeared unsure whether it would happen at all. A question to the White House on the timing of any such hike went unanswered. The USTR also did not provide information on possible rate hike, when approached by The Hindu.

Hiking this universal tariff to 15% would also complicate Washington’s agreements with countries that had reciprocal tariffs of less than 15%. Additionally, the White House has been focused on Iran in terms of foreign policy and the Department of Homeland Security shutdown, domestically.

Meanwhile, countries are busy with another part of the trade agenda: the World Trade Organization’s 14^th ministerial conference in Cameroon March 26-29. Among the contentious topics is trade in e-commerce, where Indian and American positions are not aligned. India has for long wanted an end to the moratorium on tariffs on various forms of e-commerce (software downloads, digital music, etc.) while the U.S. would like to make this permanent.