American companies hold up India-US trade agreement

WHILE INDIAN ENTITIES ARE WILLING TO SETTLE FOR NOMINAL TARIFFS OF 5% ON ICT GOODS, US FIRMS ARE PUSHING FOR ZERO TARIFF

WASHINGTON: Some US companies are at odds with their Indian branches over their willingness to accept tariffs and duties in India, according to officials in the US familiar with discussions being held for an India-US trade deal that could lead to the opening up of the agriculture sectors of the two countries on a reciprocal basis and an ambitious Free Trade Agreement (FTA).

Talks are underway towards an “interim” deal in the nearterm and an FTA over a longer term, with India agreeing to open up portions of its agricultural sector in exchange for partial restoration of its benefits under a zerotariff preferential US trade programme.

As part of these negotiations the US is also understood to have dropped its demand for access to India’s dairy sector, a particularly vexatious issue given religious sensibilities in India to dairy products derived from cattle reared on animal feed.

The dispute, according to people cited above, is between Indian branches and their US headquarters.

While Indian entities are willing to settle for reduced but nominal tariffs of 5% on information and communications technology (ICT) products, their American headquarters are pushing for “zero tariff” in a bid to leverage White House’s intervention to the fullest.

On medical devices such as stents and knee-cap implants, a US market leader is in dispute with the industry’s representative association on “trade margins at first point of sale”, a key issue in a heavily price-regulated market.

A trade deal was expected to be signed by US President Donald Trump and Prime Minister Narendra Modi at their bilateral meeting in New York on the margins of the UN General Assembly meeting in September. But it wasn’t and Trump said a shortterm deal was more likely, with a larger one later on.

Even if differences on the ICT and medical equipment are sorted out, the deal is understood to be still “some months from being wrapped up” and would require at least one more meeting of the principals, Union commerce minister Piyush Goyal and the US trade representative Robert Lighthizer.

Largely overlooked at the time in the excitement over TrumpModi and Trump-Imran Khan talks, officials from both sides have since acknowledged the two-track talks but have refused to publicly discuss details until now, especially the efforts focussed on the longer-term goal of an FTA, which paves the way for low tariffs and enhanced market access on a reciprocal basis between signatories.

Both India and the US separately have multiple bilateral and multilateral FTAs. “An FTA is very much on the table,” said Mukesh Aghi, head of the US-India Strategic Partnership Forum, an advocacy group that has been at the forefront of promoting ties between the two countries in commercial and security sectors.