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Info Service on WTO and Trade Issues (Feb25/07) Geneva, 17 Feb (D. Ravi Kanth) — The United States and India on 13 February signed an agreement in Washington DC for negotiating a bilateral free trade agreement by October this year while targeting $500 billion in two-way trade by 2030, in an apparent ambitious move based on an allegedly unequal framework, said people familiar with the development. Given the huge disparities between the two countries in terms of the number of people dependent on agriculture, in per capita income, and in the share of global trade, it appears rather obvious that the US is well positioned to secure maximum benefits from such a deal, said people familiar with the development. US President Donald Trump last week made no bones about what he wants to harvest from the bilateral free trade agreement with India. For example, on the day that he announced his reciprocal tariff plan on 13 February, he said, “India’s tariffs are very, very high … they charge tremendous tariffs.” He added, “I remember when Harley-Davidson couldn’t sell their motorbikes [in] India because of the fact that (in) India, the tax was so high, the tariff was so high.” “They can build a factory here, a plant or whatever it may be here and that includes the medical, that includes cars, that includes chips and semiconductors,” he suggested. TRADE & INVESTMENT The 33-paragraph United States-India Joint Leaders’ Statement issued on 13 February at the Oval Office contains four paragraphs (7-10) dealing with trade and investment. In paragraph 7, the two countries said they “resolved to expand trade and investment to make their citizens more prosperous, nations stronger, economies more innovative and supply chains more resilient.” The leaders resolved to deepen “the US-India trade relationship to promote growth that ensures fairness, national security and job creation.” To this end, the joint statement said that “the leaders set a bold new goal for bilateral trade – “Mission 500″ – aiming to more than double total bilateral trade to $500 billion by 2030.” It remains to be seen how this ambitious target would be accomplished without causing turmoil in the Indian market, said a person, who asked not to be quoted. In paragraph 8 of the joint statement, recognizing that this level of ambition would require new, fair-trade terms, the leaders announced plans to negotiate the first tranche of a mutually beneficial, multi-sector Bilateral Trade Agreement (BTA) by fall [by October] of 2025.” The joint statement further said that the “leaders committed to designate senior representatives to advance these negotiations and to ensure that the trade relationship fully reflects the aspirations of the COMPACT [Catalyzing Opportunities for Military Partnership, Accelerated Commerce & Technology].” The joint statement underscored that “to advance this innovative, wide-ranging BTA, the US and India will take an integrated approach to strengthen and deepen bilateral trade across the goods and services sector, and will work towards increasing market access, reducing tariff and non-tariff barriers, and deepening supply chain integration.” In paragraph 9 of the joint statement, “the leaders welcomed early steps to demonstrate mutual commitment to address bilateral trade barriers.” More importantly, it stated that “the United States welcomed India’s recent measures to lower tariffs on US products of interest in the areas of bourbon (spirits), motorcycles, ICT products and metals, as well as measures to enhance market access for US agricultural products, like alfalfa hay and duck meat and medical devices.” Further, it said that “India also expressed appreciation for US measures taken to enhance exports of Indian mangoes and pomegranates to the United States.” “Both sides also pledged to collaborate to enhance bilateral trade by increasing US exports of industrial goods to India and Indian exports of labor-intensive manufactured products [perhaps textile products] to the United States,” according to the joint statement. As regards agriculture, which currently provides full employment for more than 800 million people in India as compared to some 25,000 highly subsidized US farmers, the joint statement said that “the two sides will also work together to increase trade in agricultural goods.” In paragraph 10 of the joint statement relating to investment, it is stated that “the leaders committed to drive opportunities for US and Indian companies to make greenfield investments in high-value industries in each other’s countries.” In this regard, according to the joint statement, “the leaders welcomed ongoing investments by Indian companies worth approximately $7.35 billion, such as those by Hindalco’s Novelis in finished aluminum goods at their state-of-the-art facilities in Alabama and Kentucky; JSW [Jindal Steel Works] in steel manufacturing operations at Texas and Ohio; Epsilon Advanced Materials in the manufacture of critical battery materials in North Carolina; and Jubilant Pharma in the manufacture of injectables in Washington. These investments support over 3,000 high-quality jobs for local families.” However, the joint statement did not mention US investments in India, nor the employment that the American companies had created there. TRUMP’S REMARKS However, what appears to be rather disconcerting is President Trump’s relentlessly aggressive criticisms against India and its trade policy prior to issuing the joint statement. On 13 February, when he was standing with India’s Prime Minister Narendra Modi on the podium in the Oval Office, President Trump went on making a barrage of statements about India’s trading system and its high tariffs. President Trump said, “as we deepen our defense partnership, we’ll also strengthen our economic ties and bring greater fairness and reciprocity to our trading relationship.” “As a signal of good faith,” the US President said, “Prime Minister Modi recently announced the reductions to India’s unfair, very strong tariffs that limit US access into the Indian market very strongly.” “And really, it’s a big problem, I must say,” President Trump continued, pointing out that “India imposes a 30 to 40 to 60 and even 70 percent tariff on so many of the goods, and in some cases, far more than that.” He went on to cite some examples that are allegedly inaccurate if one delves into the Indian import duty schedule. President Trump cited as an example, a 70 percent tariff on US motor vehicles going into India, “which makes it pretty much impossible to sell those cars.” “Today, the US trade deficit with India is almost $100 billion,” he said, though the actual trade surplus that India enjoys with the US is just over $40 billion in 2024. President Trump said that he and Prime Minister Modi “have agreed that we’ll begin negotiations to address the long-running disparities that should have been taken care of over the last four years – but they didn’t do that – in the US-India trading relationship, with the goal of signing an agreement.” “And we want – really, we want a certain level playing field, which we really think we’re entitled to,” President Trump said. President Trump claimed that the Indian Prime Minister also wants a certain level playing field “in fairness … So we’re going to work on that very hard.” In an apparent move to sell US oil and gas, as well as LNG (liquified natural gas), President Trump emphasized that “we can make up the difference very easily with the deficit, with the sale of oil and gas, and LNG, of which we have more than anybody in the world.” “The Prime Minister and I also reached an important agreement on energy that will restore the United States as a leading supplier of oil and gas to India,” President Trump said. More worryingly, President Trump appears not to be concerned about the deadly impact of fossil fuels on climate change, in which countries, according to several recent estimates by various international bodies, appear to have crossed the tipping point of 1.5 degrees C by failing to reduce their carbon emissions. Prime Minister Modi remarked that he is seemingly determined to double the bilateral trade to $500 billion by 2030 and “concluding very soon a mutually beneficial trade agreement” with the US. The tariffs of a developing country as compared to a developed country were negotiated in eight rounds of trade negotiations under the aegis of the GATT (General Agreement on Tariffs and Trade, established in 1948) and its successor, the World Trade Organization, which was established in 1995. In all the eight rounds of GATT and WTO trade negotiations, successive US administrations, of both Republican and Democratic parties, led the trade negotiations. They had agreed to reduce tariffs while bringing in the controversial TRIPS Agreement, the tariffication of agricultural products, and a binding dispute settlement mechanism. However, it is increasingly becoming a sordid affair when President Trump accuses developing countries, including India, as being “the culprits” in managing to build up trade surpluses, said people familiar with the development. President Trump’s recent unilateral decision to impose a 25% tariff on goods from Canada and Mexico, a 10% tariff on Chinese goods, and later a 25% tariff on steel and aluminium, in utter disregard of the WTO’s multilateral trade rules, appears to signal a rapid dismantling of the rules-based global trading system, said people familiar with the development. In short, it remains to be seen how the Indian negotiators will accommodate the US interests in the coming days and months in concluding a bilateral free trade agreement. Even before the negotiations begin next month, India could face a big blow when President Trump initiates his reciprocal tariff plan on 2 April when the tariffs to be imposed on India will be made public. +
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