Commerce minister Piyush Goyal proposes ‘preferential trade agreement’ with the US
India and the United States have been working on a limited trade deal to expressly address the more urgent issues of concern to both sides and have said they planned to start negotiations on a broader Free Trade Agreement (FTA) later in the year, either before or after US elections in November.
Commerce minister Piyush Goyal on Tuesday proposed a “preferential trade agreement” with the US covering a limited number of goods and services as the next step after the signing of a “quick” trade deal that was just a few phone “calls” away and before the conclusion of a more ambitious Free Trade Agreement (FTA) that could take years.
India and the United States have been working on a limited trade deal to expressly address the more urgent issues of concern to both sides and have said they planned to start negotiations on a broader Free Trade Agreement (FTA) later in the year, either before or after US elections in November.
“Another couple of calls and we should be able to sort that out,” the minister said of the deal currently under negotiations. He was participating virtually an annual summit of the US-India Business Council (USIBC, a trade body), which was to take place in New Delhi but was being held virtually in view of the Covid-19 epidemic.
But as the two countries worked towards a “much more sustainable, much more robust and much more enduring” partnership in the form of an FTA, which may take years to conclude, the two sides “should also look at early harvest in the form of a preferential trade agreement”, Goyal said.
It could include “may be 50, may be 100 products and services” where the two sides could engage with “mutual trust and open spirit” to “kickstart” the trade partnership, the minister added.
No other details were available of this interim trade pact. But people familiar with trade talks between the two sides, which have been on a long time but with renewed urgency for the last one year, said the idea is to keep the “ball moving” by continuing to address trade issues in small and manageable and not wait for the FTA, which will be a long and tedious process.
The “quick” deal, as the minister described it, has been ready and waiting to be signed, but is being held over a “frustrating” desire from the US side to “squeeze” out as much as it can.
According to the same people familiar with the talks, the United States has pushed for greater market access in agriculture, dairy and medical devices sectors in the limited trade agreement being finalised.
India has sought restoration of preferential trade benefits under the US Generalized System of Preferences (GSP), which were terminated by the Trump administration in summer of 2019 to force India’s hand.
President Donald Trump’s insistence on trade deficit reduction and reciprocity precipitated a trade crisis between the countries, bringing long simmering issues to a head. He first slapped higher tariff on steel and aluminium imports from India and then evicted India from the GSP programme, which accounted for $6.3 billion worth of Indian exports to the United States in 2018, roughly 12% of total Indian goods exports to the United States.
The two sides had tried to stitch together a Phase 1 of the deal in time for announcement during Trump’s February visit to India, but failed; Indians had complained about the constant sifting of the goalpost. The two sides announcement then a plan to wrap a limited deal shortly and a larger deal later in the year.