Revived trade policy forum stepping stone for India-US trade agreement

Both nations hope to reach some kind of understanding to resolve issues pertaining to agriculture, non-agriculture goods, services, investments, over the next six to eight minths

With India and its largest trading partner — the US — trying to iron out thorny issues under the newly revived trade policy forum (TPF), experts said it could be the first step towards inking a larger trade deal in future.

Bilateral trade-related concerns haven’t yet seen any resolution. With the Joe Biden administration taking over in January this year, and both nations becoming a strategic ally, forging stronger trade ties has become more paramount now than ever, even as the US has ruled out any free trade agreement (FTA) at this point in time.

“The relaunch of the TPF is a step in the right direction. It can also clear the decks for an FTA between both countries at a later stage,” said Arpita Mukherjee, professor at Indian Council for Research on International Economic Relations.

On Tuesday, US Trade Representative Katherine Tai and Commerce and Industry Minister Piyush Goyal chaired the first meeting of the revived TPF in the Capital after a four-year gap. Both nations hope to reach some kind of understanding to resolve issues pertaining to agriculture, non-agriculture goods, services, investments, and intellectual property rights over the next six to eight months.

Agriculture products are expected to be a key focus area for both nations as time and again exporters from either side have faced hindrance in market access.

“Agriculture will play a very important role under TPF. Negotiations are expected to go beyond tariff measures and cover various non-tariff barriers. The US is a big market for India as far as agricultural products are concerned. On the other hand, US exporters have faced hurdles while sending (agri) products to India, amid various protectionist, as well as retaliatory measures, imposed by India over the past few years,” said Mukherjee, adding that while these issues are not new, it has to be seen how both countries need to deal with them.

Gradually the countries have started to sort out issues related to some of the barriers to enter the market. For instance, the latest development has been that both nations have finalised work on market access facilitation for mangoes and pomegranates, pomegranate arils from India, cherries and alfalfa hay for animal feed from the US. Indian mangoes were not exportable to the US, but the gates are now open for export as both sides have resolved the issue pertaining to shipments.

All eyes will also be on generalised system of preferences (GSP)-related developments. Even as the US on Tuesday had said it might ‘consider’ India’s request to give it benefits of the GSP scheme, withdrawn by the previous Donald Trump Administration, Mukherjee believed India will also have to offer something ‘significant’ if it is expecting resumption of benefits under the special trade treatment under the scheme.

Ajai Sahai, director-general and chief executive officer, Federation of Indian Export Organisations, said barring a few sectors, such as leather and engineering products, exports have largely remained unaffected, despite withdrawal of GSP benefits. He is also hopeful of a non-reciprocal GSP.

“The indication of restoration of GSP benefits is a good move as it will positively impact the leather and engineering goods space. Hope there are no conditions attached and if at all, those conditions will have to be analysed,” said Sahai.

In 2019, the US had removed India from the GSP scheme, a special trade treatment for developing countries due to significant trade barriers in India. India was the biggest beneficiary of GSP in 2018. Over one-tenth of US goods imports from India entered duty-free under the scheme. Shortly after the US move, India had raised its retaliatory tariffs against the US, after which Washington filed a dispute at the World Trade Organization.

Mukherjee, on the other hand, said India will also have to think about lifting some trade barriers if it wants to be a GSP beneficiary once again. “If the US accedes to India’s demand, we should also look into the ask list of American technology companies, such as transparency and clarity in data sharing,” she said.

ENDS