U.S., India Working Toward Bilateral Trade Agreement

The U.S. and India said this week they are working to conclude a bilateral trade agreement despite the persistence of disagreement on key issues.

The two sides have been engaged in negotiations on a number of trade irritants for some time, particularly since the U.S. ended India’s eligibility for duty-free treatment under the Generalized System of Preferences in 2019. Over the past several weeks there had been indications that President Trump might sign a limited trade agreement, which would restore India’s GSP benefits in return for New Delhi expanding market access for some U.S. goods, during a Feb. 24-25 visit to India.

That did not happen, but following his visit Trump said the two sides have “made tremendous progress” on an agreement, and he and Indian President Narendra Modi committed to promptly conclude negotiations. Modi indicated that this will occur by giving “a legal shape” to “the understanding reached by our commerce ministers.”

The two leaders also said this limited deal could become “phase one of a comprehensive bilateral trade agreement that reflects the true ambition and full potential of the bilateral commercial relations.” Modi said he and Trump had agreed to “initiate negotiations for a bigger deal” but did not say when that might take place. Trump added that “if the deal happens with India, it will be toward the end of the year.”

Trump has criticized India for its high tariffs on imported goods, and press reports state that India’s decision to further increase some tariffs this year was one of the factors that prevented the two sides from concluding an agreement before Trump’s visit. The president has also highlighted India’s trade surplus with the U.S., which increased slightly in 2019, and said this week that two-way trade should be “fair and reciprocal.”

However, Modi responded Feb. 25 that U.S.-India trade has “witnessed double-digit growth” over the past three years and “has also become more balanced.” He noted that the energy, civil aircraft, defense, and higher education sectors have contributed $70 billion to the bilateral economic relationship over the last four or five years and expressed confidence that this figure will continue to grow in the years ahead.

Source: Sandler, Travis & Rosenberg Trade Report


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