India, US Trade Deal to Be Signed Once Tariff Architecture in Place: Official
New Delhi: The interim trade agreement between India and the US will be signed after America’s new global tariff architecture comes into force, a senior government official said on Monday. “Because ultimately every country makes a deal as part of a package where it has a comparative advantage over competitors,” the official said.
India and the US last month announced the completion of the framework for the first phase of the bilateral trade agreement. According to this framework, the USA agreed to reduce the customs duties applied to India to 18 percent.
But the tariff architecture in the U.S. changed after the Supreme Court ruled against President Donald Trump’s sweeping tariffs. Following this, the US President imposed a 10 percent customs duty on all countries for 150 days, starting from February 24.
Due to these changes, the meeting of chief negotiators of India and the US was postponed. They were scheduled to meet last month to finalize the legal text of the agreement, which is expected to be signed this month.
“The agreement was to be signed in March. (But) When we said this, the Supreme Court decision regarding the IEEPA (International Emergency Economic Powers Act) tariffs had not come. Now, with the Supreme Court decision regarding the IEEPA tariffs, the tariffs themselves do not exist.
“Currently, there are tariffs for five months under Article 122 on the balance of payments crisis. And the tariff is around 10 percent. So, the agreement that we finalize and sign must be against the tariff structure or the comparative advantage that India enjoys in the US market,” the official said.
The official added that the US is working to rebuild a global tariff architecture.
“Once they get on this path, they can create it. At this point, I think it would be right to sign the agreement,” the official said.
The deal has already been finalized and agreed upon and both teams are negotiating to iron out the finer details, the official said.
“But in my opinion, the real signing will be achieved when the new tariff architecture is implemented on a global scale,” the official added.
If there are any changes in the 18 per cent tariffs on India, it depends on how they will happen and how the global architecture will emerge, the official said.
“If the global architecture is exactly as in the IEEPA tariffs, then it may stay that way. If it is different, then it may change. So we will have to wait to see how it progresses,” another official said.
When India completed the agreement, it had a comparative advantage compared to rival countries.
“So whenever we are ready, the US side is ready for this architecture, I think this will be an appropriate time to sign it,” the official said, adding: “There is nothing that will be a rift. There is nothing that there is no agreement on.”
The trade agreement is about comparative and preferential market access. The 18 percent tariff on India was the lowest among its rivals, which include China, Vietnam and Thailand.
Under the US’s new tariff architecture, if other countries are at “19, 20, 21 or 22 per cent, maybe India will stay at 18 per cent. But if others fall, India will also fall. That will depend on how the new architecture comes out. And that is something the US will have to make a call on,” the official said, adding that as of now the agreement is at 18 per cent.
Meanwhile, according to the news, Malaysia stated that the country did not maintain its trade agreement with the USA.
There are two groups of countries that have completed agreements with America; One announced the framework agreement but signed the legal agreement, the other did not sign the legal agreement.
Asked about two investigations launched by the United States under Section 301, the official said the department was examining its legal impact.
“These investigations take time. My opinion is that whenever a (trade) agreement is concluded and signed in the future, it will take care of these investigations,” the official added.
On March 12, the United States Trade Representative (USTR) launched a Section 301 investigation covering 60 economies, including India and China.
Investigations will determine whether the actions, policies, and practices of each of these economies in failing to impose and effectively enforce a ban on imports of goods produced with forced labor are unreasonable or discriminatory and burden U.S. commerce.
On March 11, USTR launched a Section 301 trade investigation targeting the policies and industrial practices of 16 economies, including India and China.
Regarding the trade agreement, Commerce Minister Rajesh Agarwal said, “India continues its relations with the US side for a mutually beneficial trade agreement.”
India is discussing the details with the US as the deal has many elements.
“There are some non-tariff barriers that need to be clarified. There are some other details that need to be resolved within the scope of the 232 tariffs. So I think we are using this time constructively to see that we can resolve these so that these things do not take time when the time is right to sign the agreement,” the official said. he said.
