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India’s trade deal with the US remains a non-starter for now. Here’s why

Biden administration’s focus on China and sticky issues relating to India’s reluctance to provide greater market access has meant the trade deal is off the table for now. 

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New Delhi: Commerce and Industry Minister Piyush Goyal last week ruled out any trade agreements with the United States in the near future pointing out that the world’s largest economy is not looking at any new trade agreements for now. 

He, however, assured exporters that the government is working with the United States on issues of market access for Indian exporters. 

ThePrint explains why the United States is not inclined to sign a trade deal with India at the moment.

The US-India trade relationship

India was keen to push for a mini-trade deal with the United States last year. 

Delhi, however, failed to do so, both in the final months of the Trump administration and the first few months of the Biden regime. In fact, the Biden administration has made it clear that it is not interested in entering into new free trade agreements with countries.

The mini trade deal was largely seen as a first step towards a comprehensive free trade agreement between both countries. In the trade deal, while India was seeking benefits for some of its exports such as greater access for its automobile, engineering and agro products, it also wanted restoration of the generalised system of preferences (GSP). The US, meanwhile, was bargaining for larger market access for its agri and dairy products and some manufacturing and technology-related products, as well as high-end medical devices.

Biden administration’s focus is on China

Sources said that the Biden administration’s main focus as far as trade is concerned is now aimed at China.  

The so-called  “mini trade deal” with India has been kept on the back burner for now but India and the US are now planning to once again take the conventional route to enhancing two-way trade, sources told ThePrint. 

Both sides are now actively working towards finalising an early date to hold the next round of India-US Trade Policy Forum (TPF), which has not met since 2017 as the previous Donald Trump administration took a different approach in terms of having a mini-trade deal followed by a mega India-US free trade agreement, sources said. 

They added that both Commerce Minister Piyush Goyal and US Trade Representative Katherine Tai have been holding regular discussions to keep the dialogue channels on so that exporters don’t face any kind of impediments.

As and when India and the US hold the talks, the focus areas are going to be trade in agriculture, digital trade as well as labour and environmental issues. 

Also read: Don’t burden Delhi-Washington ties with Afghanistan, or issues like democracy under Modi

Areas of disagreement

Trade experts point out that a India-US trade deal may not be easy to negotiate with the latter making some tough demands which India is unwilling to cede to. 

“If you look at the history of the discussions between the two countries, the US has been making tough demands in terms of market access. It has been seeking substantial market access in the agri sector. But that’s highly protected in India. The US also is seeking substantial amendments to patent laws and for changes in data protection laws. All these have been the sticking points,” said Biswajit Dhar, Professor, Centre for Economic Studies and Planning, School of Social Sciences at Jawaharlal Nehru University. 

“It is pretty clear that India can’t meet those demands,” he added. 

He also pointed out that the US is one of the very few countries with which India has a trade surplus. “(Former US President) Trump used to openly talk about it. The US is clear that if India doesn’t  offer much in terms of market access, then a deal is not beneficial,” he said. 

India’s trade surplus with the US was at $23 billion in 2020-21, as against $17 billion in the previous two years. In the current fiscal, the trade surplus is around $5 billion so far, data with the Indian commerce ministry shows.  The US is India’s largest export market but only its second largest importer after China. 

(Edited by Arun Prashanth)

Also read: Why India should forget Afghanistan, Pakistan, ‘Terroristan’ & shift strategic gaze to the seas


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