Free trade agreement with US unlikely, talks part of ‘trade package’

download.jpgSource: The Economic Times, Sept 12, 2018

NEW DELHI: India is discussing its bilateral trade issues with the US as part of a ‘trade package’ of mutual concerns and no separate trade agreement is being thought of, commerce department officials told ET.

US President Donald Trump earlier this week said India is keen on a ‘trade deal’ while early this year, US ambassador to India Kenneth Juster had called for an eventual free trade agreement between the world’s two largest democracies.

A trade pact is unlikely to benefit India as tariffs on most goods are already low in the US, not leaving much scope for further reduction, officials said. Moreover, the US has been tightening non-immigrant visa norms, which is India’s key interest area.

“We have been discussing a trade package of mutual concerns. There is no such trade agreement as a free or preferential trade pact,” said an official in the know of the development.

Trump’s announcement came at a time when the two sides are in the process of resolving their bilateral trade issues, which include the US levying higher tariffs on Indian steel and aluminium, and reviewing Indian exports’ eligibility for preferential duties.

On goods, India’s average tariffs are between 13% and 14% while the US’ are less than 4%, leaving a huge gap for India to reduce duties. India’s exports to the US in 2017-18 amounted to $47.9 billion, while imports were $26.7 billion. Delhi has said the two sides have not fixed a target to bridge the trade gap as both countries have a limited ability to commit a trade value for future years as most trade would be done by private parties.

“We can’t reject or accept a trade agreement without a feasibility study,” the official said. A Delhi-based trade expert said this is the US’ strategy to get into bilateral trade pacts and ultimately arm twist developing countries to get its way around at the World Trade Organization.

“A trade agreement with the US would mean India would have to compromise on its digital future as they are reluctant on free flow of data,” said another expert on trade issues.

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