The trade deal would lower some tariffs on US products and restore preferential treatment for some Indian exports to the United States, as per Reuters reports.
The United States and India are racing to negotiate a limited trade deal that US President Donald Trump and Indian Prime Minister Narendra Modi can sign at the United Nations General Assembly in New York, people aware of the matter said.
PM Modi has used tariffs to try to boost investment in manufacturing, like President Trump.
A key part of Modi’s “Make-In-India” campaign is to attract foreign cash and create factory jobs for millions of youth entering the workforce.
A deal between the world’s most populous democracies would be a welcome victory for Trump, whose administration has made little headway negotiating an end to its prolonged trade war with China.
The deal under discussion with India would lower some tariffs on US produce and restore preferential treatment for some Indian exports to the United States, the sources said.
Trump and Modi met this Sunday (September 22) in Houston at an Indian-American rally dubbed #HowdyModi event in a 50,000-seat stadium, a sign of their warming relations, which are contributing to expectations for a mini trade deal.
Trump has demanded better terms of trade from most of the top commercial partners of the United States, and blames previous deals for the loss of millions of US manufacturing jobs.
US-India trade relations have been worried. Trump has repeatedly complained about India’s high tariff rates, including a 50% tariff on Harley-Davidson motorcycles.
Amazon & Walmart-backed Flipkart issues
The United States has also taken issue with India’s new investment rules on e-commerce that limit how companies like Amazon.com Inc and Walmart-backed Flipkart can do business in a rapidly growing online market set to touch $200 billion by 2027.
We’ve been talking to the Americans, we have engaged them for many months now, Indian Foreign Minister S Jaishankar said at a recent news conference.
Jaishankar’s expectation is that some of the sharper edges, they would be addressed in some forms in the not too distant future.”
Apple supplier Foxconn recently expanded production of iPhones in India to avoid a 20% import tariff and diversify its supply chain from China.
Bilateral US trade with India, at $142 billion last year, is just a fraction of the $737 billion in US-China trade.
Modi-Trump trade deal: Tariffs & Generalized System of Preferences
India was the largest beneficiary of the Generalized System of Preferences(GSP), which was designed to help developing countries that dates from the 1970s.
The United States in June ended duty-free access for about $5.7 billion worth of Indian exports under its Generalized System of Preferences (GSP) program, including chemicals, plastics, leather and rubber goods, and auto parts.
India responded with higher retaliatory tariffs on 28 US products, including almonds, apples and walnuts.
Moreover, we are also the largest buyer of US almonds, paying $543 million for more than half of US almond exports in 2018, according to the US Department of Agriculture. It is the second largest buyer of US apples.
India-US trade deal: India likely to allow US dairy imports
Most Importantly, the talks are focused on US demands that India reduce agricultural tariffs, including those for almonds, pork, dairy products, cherries, apples and other commodities, people familiar with the talks in both Washington and New Delhi said.
However, India is likely to allow some US dairy imports, the official said. Another Indian official said the United States was pushing India to remove high pricing barriers on imported US medical devices including cardiac stents.
In return, India wants the GSP restored for a few more years, as Modi struggles to boost exports dampened by sluggish global demand made worse by the US-China trade war.
India also wants market access for some of its farm products such as grapes to export to the United States.
On the other hand, the United States is also seeking lower tariffs on high-end electronics products, one of the Indian officials said.
Both sides are discussing revising India’s domestic content rules on ethanol to allow more imports of the US fuel additive, two US sources aware of the matter said.
A narrow deal would be a positive first step and leave thorny issues aside such as the new e-commerce rules, said Roger Murry, deputy director of the Alliance for Fair Trade with India.
Biggest takeaways from #HowdyModi event:— Aditya Raj Kaul (@AdityaRajKaul) September 22, 2019
1) India and US to together fight Radical Islamic Terror.
2) India-US trade deal imminent.
3) Trump likely to visit India in 2019.
4) Support to Article 370 abrogation on US soil.
5) Modi-Trump chemistry major optics ahead of #UNGA.