In a clear sign that India and the US are close to finding common ground on their outstanding trade issues that started looking intractable, commerce and industry minister Piyush Goyal on Monday said here that the two sides "have almost resolved the broad contours" of an imminent deal in this regard. He even hinted at a "much larger engagement between the two countries in the days ahead", hinting at the possibility of a larger bilateral trade agreement, following the limited deal on the immediate horizon.
This is perhaps the first time New Delhi is making it unambiguously clear that the differences between the two sides on a host of trade issues have indeed narrowed down. A limited deal was expected to be announced when Prime Minister Narendra Modi met US President Donald Trump on September 24 but that was not to be, as both sides practically stuck to their positions.
Later, on October 4, addressing the India Economic Summit organised by the World Economic Forum here, US commerce secretary Wilbur Ross said there was no reason why a limited trade deal with India couldn't be signed quickly, even as he asked New Delhi to balance the interest of large e-tailers like Amazon and Walmart-backed Flipkart with offline retailers' in its e-commerce policy.
Speaking at the same session, Goyal, however, appeared not much inclined to endorse Ross as he asserted that there was no change in India's FDI policy for e-commerce, as the government was keen on protecting small brick-and-mortar stores.
"I do not see any great difficulty in closing the gap on the first announcement," Goyal said at a USISPF programme. He added that by now, both the sides could in fact have announced something, but certain other engagements including the US talks with Japan and China delayed it. "Both I and US Trade Representative Robert Lighthizer have understood that we have huge potential which we still need to tap… We will hopefully come out with a first set of agreements soon… But we both believe that India and the US should look at a much larger engagement in the days ahead, possibly even leading to an announcement for a bilateral agreement which will go beyond near tinkering which we are doing at present," Goyal added.
Asked about the visit of USTR here, he said as soon as both the sides are in a position to come to a reasonable conclusion, USTR would visit India. The US wants India to scrap/cut "not justified" tariff on ICT products (20%), motorcycles (50%) automobiles (60%) and alcoholic beverages (150%). It is seeking better trade balance with India through greater market access in agriculture and dairy products. Similarly, Washington wants New Delhi to remove price caps on medical devices like stents, a move that will help American companies like Abbott. The US has also expressed concern over what it thinks India's "frequent changes" to e-commerce FDI rules, and data localisation.
For its part, India is pitching for an exemption from the extra duty imposed by the US on steel and aluminium, resumption of duty-free export benefits for some Indian goods under the so-called Generalised System of Preferences as well as greater market access for its products in sectors ranging from agriculture, automobile and auto components to engineering.
India fears that it could lose as much as $3.2 billion a year if it scraps duties on the seven ICT products, including high-end smart-phones and smart watches, acceding to US demand. Also, China, not the US, will be the biggest beneficiaries of any such move, as the US made up for only 2% (or $415 million) of India's imports of these seven products worth $20.5 billion in FY18. Instead, India offered to cut tariffs in those ICT products where the US could benefit more. But Washington remained unimpressed.
India's exports to the US, its largest market, touched $52.4 billion in 2018-19, while imports were to the tune of $35.5 billion. Its trade surplus with the US has been shrinking in the past two years, as it has stated importing oil and gas from the largest economy, something that India has been highlighting. According to the US government data, New Delhi's trade surplus with Washington eased to $21.3 billion in 2018 from $22.9 billion in 2017. In contrast, China's trade surplus with the US widened further to a record $419.2 billion last year from $375.6 billion in 2017, despite the tariff war between the top two economies.
On the 16-nation Regional Comprehensive Economic Partnership (RCEP), Goyal said on Monday that the government would protect the interests of domestic industry before entering into the proposed mega free-trade pact, which is in the last phase of negotiations. An RCEP ministerial meeting held in Bangkok last week had failed to reach a consensus on sticky issues, even as a deal is meant to struck soon. No joint statement was issued then as certain key issues remained unresolved, even after two days of intense negotiations on October 11 and 12, casting a shadow over a leaders' summit on November 4.
"Every interest of domestic industry and the people of India has to be protected before we execute any free-trade agreement," the commerce and industry minster told reporters when asked whether RCEP negotiations would be concluded next month. The member countries have fixed a target to conclude the talks in November and sign the agreement in June 2020.
– with PTI inputs