A building block to a bigger trade pact with u.s.?

India is likely to end its ‘little war’ over tariffs with its largest trade partner, the US, sometime this month by signing a deal that both sides are likely to claim as a victory.

Published: 19th November 2019 04:00 AM  |   Last Updated: 19th November 2019 01:36 AM   |  A+A-

India is likely to end its ‘little war’ over tariffs with its largest trade partner, the US, sometime this month by signing a deal that both sides are likely to claim as a victory. The Trump administration will tout the agreement as a win that will help exports of apples, nuts and other produce from American farms as well as sales of high-value motorcycles and technology products that were at the receiving end of high Indian tariffs. 

The Modi government will call the renewal of GSP privileges to its exports, which allows duty-free entry for over 2,000 categories of Indian products into the US, as well as an easier regime for certain other Indian products, including possibly steel and IT, as victories for ‘Make in India’. But far more important would be an unwritten understanding that India is trying to hammer out to stop the ‘victimisation’ of its tech companies that find a tougher visa regime and a harder US market as among non-tariff barriers to be overcome—in addition to agreeing that both sides will offer a more level-playing field to each others’ companies in other areas including government procurement.

The two issues where India has stood up to the US and made it clear it will not budge for the time being are e-commerce, where a FDI cap of 49% is likely to remain despite lobbying by the likes of Walmart and Amazon, and the question of servers to store data, where India insists that at the least, mirror servers should be present locally to make it easier to track information on monetary exchanges by Indians with foreign entities. 

Hopefully the deal will eventually work as a building block to a bigger trade pact with the US with which India had a two-way trade in goods and services worth $142.6 billion in 2018. Many on both sides believe it would be a good way to kill two birds with one stone—firm up India-US ties and give India an alternative to the RCEP. There are analysts who believe the bilateral trade can go up to $500 billion within the next five years, with a host of sectors ranging from defence to banking and energy identified as key areas of cooperation.

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