Trading thoughts . The India-US trade deal won’t come so easy

The mega trade deal between India and the US has been deferred for the time being. “We can have a trade deal with India, but I am saving the big deal for later on,” claimed US President Donald Trump on Tuesday. “We’re doing a very big trade deal with India.. We’ll have it,” he insisted. The transactional American President, who will visit India next week, remains unsure when it will be concluded. “I don’t know if it’ll be done before the elections [in November] but we’ll have a very big deal with India,” Trump bragged.

Why was it taken off the agenda for Trump’s grand ‘Kem Cho’ visit? It is not that the two sides were not engaged in finalising the much-anticipated deal. Senior US trade officials held intense negotiations with their Commerce Ministry counterparts last week. Prior to this, the US Trade Representative Ambassador Robert Lighthizer met Commerce Minister Piyush Goel in Davos on January 23.

India, which recently turned its back to the RCEP agreement on alleged fears that its market will be swamped by Chinese imports, seemed more eager to embrace Uncle Sam. But, discussions got bogged down on several issues. Differences over market access, restoration of $6 billion benefits accruing to Indian exporters under the GSP — which was terminated by the Trump administration last year — duties imposed by the two sides following the imposition of US Section 232 national security provisions on steel and aluminium in 2018, and comprehensive changes demanded by Washington in India’s intellectual property laws as well as e-commerce regulations (including cloud computing) cannot be easily resolved expeditiously. Consequently, Ambassador Lighthizer cancelled his visit to India last week.

Different priorities

More importantly, Trump did not want to settle for an insignificant trade deal with his “friend” Narendra Modi at this juncture. Instead, he wants to use the India visit for a much bigger purpose: wooing the Indian diaspora for the November elections.

So, the visit for which the Modi government has spruced up Agra and Ahmedabad on an unimaginable scale that hides the wretched conditions under which Gandhi’s Daridra Narayans live, will become useful for garnering support of the millions of naturalised Indians at the US hustings, particularly those “non-resident Indian knicker-dharis” or NRIKDs (a term coined by historian Sanjay Subrahmanyam in his book, Is Indian Civilization a Myth? ).

Nevertheless, the world’s largest economy of about $19.42 trillion last year and relatively small economy of about $3 trillion — with the world’s highest disease-burdened population, according to World Health Organization reports, and per capita income an eighth of US average— are incomparable in terms of interests. After all, the US is stacked with a range of hi-tech sectors in all areas, particularly in pharmaceuticals, and hundreds of billions of dollars of its heavily-subsidised farmers in line. In contrast, India can only supply services providers and basic products such as steel and automotive parts.

The US has a historical track record of extracting concessions at each point/round of negotiations and then demanding more. Consider the US-Korea free-trade agreement: starting from the Bush administration to the Obama era and now the ‘extortionist’ Trump a regime, there has never been a moment when Washington changed the goalposts to meet its maximalist demands.

US demands

The US’ negotiating tactic has always been about pocketing concessions while discarding the negotiating parameters at each juncture. During the several rounds of General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) negotiations, the US resorted to unusual muscular tactics. For example, the US extracted from India the trade facilitation agreement without agreeing to a permanent solution for public stock-holding programmes. Washington had agreed on “less-than-full-reciprocity” commitments in 2004 to enable India and other developing countries to reduce their industrial tariffs and promised enhanced market access for the short-term services providers. India secured zero, zilch, nada.

Today, the Trump administration is saying India must provide reciprocal treatment in all areas, failing which it will impose high tariffs on Indian goods and new barriers for H1-B visas. India actually launched a trade dispute against the US for barriers on short-term services providers at the WTO in 2017, but the Modi government later developed cold feet.

It was also not clear whether there was any discussion on the need for a “totalisation” agreement (protection of benefit rights of workers and short-term IT and other services providers). The totalisation agreement will free Indian IT companies from paying $1 billion to the American exchequer annually towards social security payment. In short, the trade deal between Washington and New Delhi, as and when it happens, will remain asymmetrical.

COMMENT NOW