India racing the clock to regain Trump’s trade favor

U.S. President Donald Trump meets Indian Prime Minister Narendra Modi for bilateral talks during the G7 summit in Biarritz, France, August 26, 2019. REUTERS/Carlos Barria

WASHINGTON – The United States and India are racing to settle several outstanding trade disputes in time for President Donald Trump and Prime Minister Narendra Modi to finalize a limited accord when they meet later this month during an annual U.N. General Assembly session.

Amid skepticism that they can quickly resolve numerous commercial irritants with India, U.S. officials are also rushing to wrap up a more ambitious deal with Japan, as the president seeks trade achievements to trumpet during his reelection campaign.

The negotiating push with New Delhi follows talks between Trump and Modi on the sidelines of the Group of Seven summit last month in Biarritz, France, and comes after the American president in June revoked special trade privileges that allowed more than $6 billion dollars worth of Indian goods to enter the United States last year duty-free.


Trump acted after India failed to open its market to U.S. manufacturers and farmers, as required by the duty-free program known as the Generalized System of Preferences (GSP). India, which fired back with its own levies on 28 U.S. products, including apples, almonds, and walnuts, has among the highest average tariff rates among major economies and runs a nearly $21 billion surplus in its goods trade with the United States – a measure that Trump watches closely.

American officials now are seeking greater access to the Indian agricultural market, lower tariffs for industrial goods and a relaxation of price controls on medical devices. India, which has its own complaints about U.S. immigration policy and financial sanctions, wants its trade privileges restored.

“For their own reasons, each side wants to get something done. Whether they can actually do it is another matter,” said Rufus Yerxa, president of the National Foreign Trade Council.

A spokesman for the U.S. trade representative declined to comment. The Indian Embassy in Washington did not respond to a request for comment.

India has long been a difficult commercial partner. Its high tariffs – five times the average U.S. figure -and numbing bureaucracy have frustrated hopes of capitalizing on the country’s 1.3 billion-person market. U.S.-India goods trade last year totaled $88 billion, equal to just seven weeks’ worth of merchandise moving between the United States and China.

Trump has publicly lashed the Indian government for its 50 percent tariffs on imported heavy motorcycles, which he says is unfair to Harley-Davidson. And U.S. officials this summer threatened to launch an investigation of Indian trade practices under Section 301 of U.S. trade law, which could enable Trump to hit Indian products with import taxes.

“It has not been going well with India on the trade front,” said Alyssa Ayres, deputy assistant secretary of state for South Asia in the Obama administration. “Things have been going in the down direction for the last two years.”

The end of India’s GSP status, which applies to only a sliver of its trade with the United States, has yet to make a significant impact on trade between the two nations. In July, the only full month since the privileges were revoked, the United States imported about $5 billion worth of Indian merchandise, up from $4.6 billion during the same month last year, according to the U.S. Commerce Department.

Recent developments have offered a glimmer of hope for the ongoing talks. In national elections this spring, Modi’s ruling Bharatiya Janata Party increased its parliamentary majority, potentially providing political space for Modi to compromise.

The prime minister likewise named a new commerce minister, Piyush Goyal, who is reported to favor a deal. And the two countries’ leaders are engaged in the bargaining.

“Together, we are working in the area of trade. We are making efforts to take this forward,” Modi told reporters at the G-7 summit before meeting Trump behind closed doors.

“It does sound like India is taking it a bit more seriously,” said Rick Rossow, a senior adviser at the Center for Strategic and International Studies. “But we just don’t know if it’ll be enough.”

Administration officials also face pressure to finalize a trade agreement with Japan after Trump said at the G-7 summit that a deal had been reached “in principle.” In fact, tough bargaining continues in hopes that the U.S. president and Japanese Prime Minister Shinzo Abe can announce a completed accord at the United Nations later this month.

Trump is also pursuing a separate trade deal with China, and the outcome of each of these negotiations remains in flux.

Any early agreement with India would be more limited and would fall far short of the sort of comprehensive trade deal that requires congressional approval. Indian policies on e-commerce and data localization that U.S. companies regard as tilted against them, for example, are unlikely to be amended anytime soon.

“We’re realistic. We want to see the start of progress,” said Roger Murry of the Alliance for Fair Trade with India, a business group. “Even a small deal would be historic.”



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