World / India and the U.S. to finalise limited trade package deal

The presence of India’s Commerce Minister Piyush Goyal in New York City for discussions with United States Trade Representative (USTR) Robert Lighthizer and team on Tuesday afternoon (from 16:00 hrs), confirmed by several sources to The Hindu, has raised expectations that India and the U.S. are close to finalising a limited trade package that has eluded them since the NDA 2.0 government took office at the end of May.

This limited package is likely to be accompanied by the announcement that negotiations on a Free Trade Agreement (FTA) will begin. This, if it happens, will be something U.S. President Donald Trump can claim credit for with his constituents. Mr. Trump went further than he normally does for visiting heads of government and spoke at Prime Minister Narendra Modi’s ‘Howdy Modi’ diaspora rally in Houston on Sunday. Larger issues for the U.S. like India’s policies and laws around data mobility and FDI in e-commerce are outside the scope of the current discussions, but remain major challenges between the two trading partners.

“When President Trump and PM Modi met last they had a broad understanding that the issues on trade must be resolved quickly, and those discussions are ongoing,” MEA spokesperson Raveesh Kumar said on Monday night, without divulging details.

On the table are discussions around medical devices — stents and knee implants , Information and Communicaiton Technology (ICT) and dairy products. The U.S. has wanted changes in regulations in these areas — removal of price caps (‘Trade Margin Rationalization’ or TMR on medical devices) for medical devices, further cuts in tariffs for ICT and greater access for dairy products and some other categories of agricultural goods, more than one source told The Hindu.

Specifically, there is a discussion around 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 U.S. wants India to scrap the 20% tariffs that exist on ICT goods.

For India, there is likely to be a partial reinstatement of preferential market access to U.S. markets under the Generalized System of Preferences (GSP) program, which was revoked for India after June 5. Representations from the domestic medical device and dairy industries had been partly why USTR initiated a GSP review.

The reinstatement will be partial, because India is not likely to release price caps on medical devices. India has also been cautious about further liberalizing the ICT sector as it fears that markets will be flooded by Chinese goods. The trade package is also likely to 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 U.S. is likely to enhance facilitation of processes. For instance, a certification of irradiation facilities in India for fruit before they are sent to the United States.

The limited trade deal could fall through at the last minute, but the finish line is within sight, a source with knowledge of the proceedings had told The Hindu last week. The source also added that if Mr. Goyal came to the U.S., it signified that some sort of agreement was all the more likely.