Trade negotiations are never easy and for Modi-Trump duo to succeed, both sides have to believe in a policy of give and take.
The US-India deal stumbled over duties imposed by India on ICT (information and communication technology) products, the US wanted 20% duty on mobile phones and ethernet switches to be reduced or eliminated.
On the other hand, India wanted the Generalised System of Preferences which gives preferential market access for its products in the Us restored.
Contrary to expectations that were consciously generated and managed by both sides, India and the United States failed to arrive at a limited trade deal that was to have been announced during this visit of Prime Minister Narendra Modi to the US.
US understands Indian market for medical devices like stents and knee implants
The United States is also understood to have demanded greater access to the Indian market for medical devices such as stents and knee implants apart from its dairy and agricultural products.
These are sensitive products politically for the Indian side as Mr. Modi has often taken credit for making them affordable.
Loosening price controls now is not an option for India as that would push up prices of these products in the country.
These are so far as a limited trade deal goes, a full scale trade agreement would pose bigger challenges on issues such as intellectual property, e-commerce and the subject of H1B visas.
Foreign Secretary Vijay Gokhale has said that the two sides “narrowed” down their differences and made “significant progress” but it is clear that there is still a wide gulf even assuming that India is willing to go more than half the way to strike a deal.
That a deal could not be struck despite Commerce Minister Piyush Goyal winging his way to New York to lead negotiations tells the story.
For U.S. President Trump, even a limited deal with India will be something to talk about as he approaches election year.
This is especially because trade talks with China are going nowhere. China has not only taken Mr. Trump’s punitive tariffs on its chin but has retaliated in kind, picking the products that could hurt his constituency and supporters.
This explains the hectic, behind-the-scenes activity with India in the last few weeks.
With its economy in the grip of a major slowdown, any concessions from India on imports of the US products may not have gone down well both politically and in economic terms.
Going by the limited information in the public domain, it appears that India has played tough and refused to yield to U.S. demands.
Trade negotiations are never easy and for them to succeed, both sides have to believe in a policy of give and take.
It does not help if one side tries to bulldoze the other into submitting totally to its interests. At this point in time it does seem that even a limited trade deal between India and the U.S. is some distance away.
India-US: Howdy Modi and ‘Elvis of India’
Calling PM Modi the Father of India, Trump, while referring to the ‘Howdy, Modi’ event in Houston, Texas, said that the crowd “loved” him and that he is like “Elvis of India”. Trump was referring to American singer and actor Elvis Presley.
PM Narendra Modi made the remarks during a bilateral meeting between him and US President Donald Trump.
PM Modi said that as far as trade is concerned, an agreement was signed day before yesterday (September 22) where Indian company Petronet invested $2.5 billion in the energy sector.
India and the US will soon have a trade deal to be followed by a bigger agreement later, US President Donald Trump said on Tuesday, suggesting that the two nations may be close to resolving current disputes.
During a joint press conference with PM Modi, Trump said that, we are doing very well. I think very soon we will have a trade deal. We will have a larger deal later on.
Restoration of the Generalized System of Preferences (GSP) for India
External Affairs minister S Jaishankar and commerce and industry minister Piyush Goyal were also present during the meeting.
The announcement of a trade package along with a larger trade deal is something Trump would want to claim credit for with polls just over a year away.
MEA spokesperson Raveesh Kumar on September 23 said that, when President Trump and PM Modi met last, they had a broad understanding that issues on trade must be resolved quickly, and those discussions are ongoing.
On the table are discussions on restoration of the Generalized System of Preferences (GSP) for India, which will allow the country to resume select exports and concessional duties.
India had exported $5.6 billion worth of goods last year under this regime.
Price controls on medical devices, duty cuts on Harley Davidson bikes and market access to American agricultural commodities, among others, are US trade issues.
Specifically, there is a discussion on India making a commitment to revisit current price controls on medical devices within a certain period of time if not an immediate release of these caps.
The US also wants India to scrap 20% tariffs
The US wants India to do away with price controls on devices with innovative features and keep them separate from mass products.
America also wants India to scrap 20% tariffs on information and communication technology goods.
New Delhi has also been cautious about liberalising the ICT sector as it fears that markets will be flooded with Chinese goods.
For India, there could be a partial reinstatement of preferential market access to American markets under GSP which was revoked on June 5.
Representations from the domestic medical device and dairy industries had been partly reasons why USTR initiated a GSP review and subsequently withdrew the benefit.
The trade package could see market access for some Indian agricultural products such as table grapes and pomegranates.
In areas where there is already market access for India, the US is likely to enhance facilitation of processes, like a certification of irradiation for fruit before export.
The two sides have been engaged in talks to iron out the differences which began last year when the US levied global additional tariffs of 25% and 10% on the import of steel and aluminum products, respectively.
India responded by levying retaliatory tariffs on 28 products originating or exported from the US with effect from June 16 for which the US dragged it to WTO.
The office of the US Trade Representative had linked market access in the two areas of dairy and medical devices to continuation of GSP and also sought data related relaxations, including in India’s e-commerce policy.
New Delhi may also work on a separate HS Code so as to facilitate further duty reduction or elimination on Harley Davidson bikes.