An Indian trade official said on Monday that a two-way trade deal under negotiation between India and the United States can only be finalised once the USTR Section 301 probe concludes.
The investigation, launched by the United States Trade Representative against India and other countries, probes unfair trade practices.
The Indian trade official further stated that New Delhi would further seek assurances from Washington that it would not be subjected to additional tariffs in the future after the trade deal, Reuters news agency reported.
What is the Section 301 probe?
The USTR in March launched two unilateral Section 301 investigations against a number of countries, including India. This was done over excess capacity and failures to eradicate forced labour in global supply chains.
According to USTR, the section has been imposed over failure to “effectively enforce a prohibition on the importation of goods produced with forced labour.” In a statement issued by the US trade body, it said it had concluded under Section 301 of the US Trade Act of 1974 that the acts, policies and practices of the 60 economies are “unreasonable and burden or restrict US commerce”, making them actionable under American trade law.
“The failure of our most important trading partners to address the importation of goods made with forced labour is unacceptable. This creates a dynamic where American workers are forced to compete globally on an unlevel playing field,” US trade representative ambassador Jamieson Greer said in the statement.
{{/usCountry}}“The failure of our most important trading partners to address the importation of goods made with forced labour is unacceptable. This creates a dynamic where American workers are forced to compete globally on an unlevel playing field,” US trade representative ambassador Jamieson Greer said in the statement.
{{/usCountry}}Owing to this, the USTR, on June 2, proposed imposing 12.5 per cent tariffs on 54 countries, including India, for allegedly failing to prohibit the import of goods produced with forced labour, PTI news agency reported. However, this is still a proposal and is not final, and the USTR said that interested parties can submit requests to appear at hearings and summaries of testimony by June 22.
Why has the probe been initiated?
While the interim framework for a trade deal between India and the US was agreed to and announced on February 7, the US Supreme Court, nearly two weeks later, ruled against Trump's reciprocal tariffs, which were imposed under the 977 International Emergency Economic Powers Act (IEEPA).
While Trump imposed 10 per cent tariffs on all 150 countries after the court ruling, these new duties end on July 24, and the changed tariff landscape may spur both sides to revisit the earlier agreement. The February joint statement on the framework by India and the US has a clause that in the event of any changes to the agreed-upon tariffs of either country, the US and India agree that the other country may modify its commitments.
Further, with the reciprocal tariffs now gone, the Trump administration is left with the option of using the Section 301 mechanism to impose new tariffs. The US can use this as a pressure tactic to negotiate with its trading partners.