AsianFin -- The prospect for a trade pact between U.S. and India has soured, according to a report on Tuesday.
Credit：U.S. Embassy & Consulates in India
Hopes of an interim India-U.S. trade deal before the August 1 deadline are fading as talks stuck over tariff cuts on key agricultural and dairy products, Reuters reported, citing Indian government sources.
India is rejecting to open its politically sensitive agriculture and dairy sectors, while Washington is resisting New Delhi’s demand for relief from higher sectoral tariffs, per the report.
"An interim deal before August 1 looks difficult, though virtual discussions are ongoing," one of the aforementioned sources said, adding a U.S. delegation was expected to visit New Delhi soon to continue negotiations. Another source said officials are exploring if the issues like opening up the agricultural sector can be deferred to a later stage after an interim deal.
The report came after India's trade delegation returned from Washington after a fifth round of talks without a breakthrough. India was one one of the first trading partners that start negotiating with the Trump administration.
U.S. President Donald Trump and his cabinet members had repeated they would make a deal with India soon, but talks so far still failed to remove all the hurdles. Trump on July 7 signed an executive order, delaying the tariff deadline on July 9,Wednesday, to August 1. That order effectively won more time for U.S.-India trade negotiations.
Bloomberg on July 11 reported the U.S. and India are working toward interim trade agreement that could see US tariffs on goods from India dip below 20%. That tariff level, if achieved, would be lower than the 26% Trump proposed for India on April 2, thus put the Southern Asian economy in a better position than its peers in the region, such as Vietnam.
It was said that the trade arrangement agreed by both sides will be announced through a statement, which would likely set a baseline tariff below 20% with language that would allow the two sides to continue negotiating the rate as part of the final pact. The interim agreement would reportedly give New Delhi space to resolve outstanding issues to hammer out a fuller deal by fall.
India last week was reported to seek a trade deal at more favorable tariff rates than Trump had agreed with Indonesia and Vietnam. Bloomberg on July 17 reported New Delhi believes the U.S. doesn’t view it as a transshipment hub like Vietnam and other Southeast Asian nations, and negotiations so far suggest the tariff rate that India is facing would be better than those countries.
India’s negotiating team would be hoping to bring the tariff down to below 10%, the report cited Soumya Kanti Ghosh, chief economist of State Bank of India, the largest government-owned lender, and a member of the prime minister’s Economic Advisory Council. While New Delhi is unwilling to open up the agricultural and dairy sectors, it may make concessions in non-agricultural sectors, said the economist.
