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India has to tread with caution in its talks with the US
| Photo Credit:
Ratana21
Having been slapped with a 27 per cent levy on goods exports to the US, India needs to arrive at some clarity on its negotiating stance in bilateral FTA talks. The Trump administration is using levies as a tool to browbeat major trade partners into submission. The US has also upped the ante by listing out a litany of complaints in its recent National Trade Estimate report, prepared by the office of the US Trade Representative. This wishlist, comprising perennial demands where differences will inevitably remain, will probably find its way to the negotiating table. India should be firm, and yet pragmatic where feasible — resisting US attempts to set the pace for an early harvest deal by this autumn.
It should refute the US’ ‘tariff king’ argument. India’s weighted average tariffs, according to WTO data, are about 12 per cent, whereas the US cites a misleading simple average tariff of 17 per cent (WTO data), against its own 3.3 per cent. As America seeks to wipe out its trade deficit with India ($45 billion, and less than 3 per cent of its overall imports), it wants to drive a hard bargain in key areas. The US is particularly keen as the world’s second largest farm trader to sell more to India. It seeks to prise open the Indian market for wheat, corn, rice, soyabean, pulses, meat and dairy products and a variety of fruit, which are subject to protective rates.
The USTR report has protested non-tariff curbs on drugs and medical devices, under which refurbished ones come under scrutiny, as well as standards on the GM content in food products or an inquiry into animal feed. The Americans also seem to have squarely told India to wind down its purchases of Russian oil. On the imports side, the US will be training its guns on electronics and the pharma industry. President Trump has said that he plans to slap tariffs on pharma ‘that have never been seen before’. India’s $9-10 billion pharma exports of generics (in about $87 billion of total exports to US) are under a cloud.
Agriculture and dairy tariffs are justified for livelihood reasons and allowed under WTO rules. It is unfair for the US to cavil at India’s farm duties, when its farming is cleverly subsidised to evade WTO scrutiny. Nor can food safety standards be wished away. The US has for long pursued the relaxation of intellectual property rights, specifically Section 3 (d) of the Patents Act that restricts evergreening. There is no case now for relenting on their terms. Enforcing standards on medical devices is borne out by the recent history of faulty hip transplants. India could, however, buy a reasonable sum of oil and gas and cut levies on less consequential products such as alcohol and some exotic fruits. The auto sector, which has matured under protection for long, can bear a duty cut. India needs to play for time in these talks, amidst huge protests that have broken out against the Trump government. Whether the US relents on its tariffs and other steps, amidst global and local retaliation, remains to be seen.
Published on April 6, 2025
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