Indo-U.S. $ 10 billion trade deal is a precursor to a Free Trade Agreement between the 2 nations
India and United States (U.S.) are all set to sign a trade deal worth U.S. $ 10 billion, ahead of the President of U.S. – Donald Trump’s visit to India in February 2020.
As of now, the deal is getting legally vetted. It will be finalised in the 2nd week of February 2020 when U.S. Trade Representative – Robert Lighthizer will meet the Indian Minister of Commerce & Industry – Piyush Goyal in New Delhi. This will be followed by official signing of the deal by Prime Minister of India – Narendra Modi and Donald Trump when the latter visits India on February 24-25, 2020.
The deal is a precursor to a Free Trade Agreement between the 2 nations. India expects to sign deals to raise its defense and energy purchases from the U.S. during the president’s visit. A 6-member team of U.S. Administration was in Delhi last weekend to discuss the terms of the deal.
The deal is likely to address the U.S.’s demand of doing away with duty on U.S. information and communication technology goods along with market access for its dairy products and duty cuts on Harley-Davidson motorcycles. In addition, U.S. also wants India to buy more almonds form it. Besides, India also wants restoration of benefits under the Generalized System of Preferences (GSP).
Under the GSP Programme, certain products are allowed to enter the U.S. market without any duty, provided the beneficiary developing country meets a set of criteria established by the U.S. The criteria include providing intellectual property protection and giving a reasonable and fair market access to the U.S. The preferential trade treatment given to India was called off in June 2018 by Donald Trump as he believed that the move would help in reducing U.S. trade deficits.
It is to be noted that India exported goods worth U.S. $ 6.3 billion to the U.S. under the GSP in 2018, accounting for around 12.1% of India’s total export to the U.S.
Prior to this in June 2019, the Central Board of Indirect Taxes and Customs (CBIC), India, increased the tariffs on 28 U.S. goods that included apples, almonds, pulses, pears, walnuts, lentils and tube and pipe fittings, screws bolts and rivets. These tariffs were a retaliatory move by Indian Government in response to 25% tariff on Indian steel and 10% tariff on aluminium, imposed by U.S. in March 2018. Since India is one of the major exporters of these items to the U.S., the move has affected Indian revenue in tune of U.S. $ 240 million.
The upcoming India-U.S. trade deal will come after India surprised its Asian trade partners in November 2019 when it abandoned a China-backed trade agreement during Regional Comprehensive Economic Partnership (RCEP) Summit. The RCEP is a proposed Free Trade Agreement (FTA) between the 10 member states of the ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and its 6 FTA partners (China, Japan, India, South Korea, Australia and New Zealand).
During the RCEP Summit, the members proposed bringing down the import duties to zero on most of the agricultural commodities which was not acceptable by India. For the records, the deal has been criticised by Indian farmers as their livelihood will be impacted by it. The farmers had urged the Government of India to withdraw from the deal.
