Trade talks stuck as U.S. presses oil, aircraft sales to India

Trade talks stuck as U.S. presses oil, aircraft sales to India

As both countries seek to reaffirm their strategic partnership, India is in the crosshairs of economic nationalists in the Trump administration

India and the United States are in a deadlock over contentious trade issues after the Donald Trump administration sought a formal commitment of additional purchases of $10 billion annually for the next three years, as part of a trade agreement under negotiation.

As both countries seek to reiterate their strategic partnership at the first 2+2 dialogue in New Delhi on Thursday, India is in the crosshairs of economic nationalists in the Trump administration. India has a surplus of $23 billion in trade with America, and the U.S. wants to wipe that off by forcing more imports by New Delhi, as part of a proposed trade agreement.

U.S. Secretary of State Mike Pompeo. File

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“Our concerns are steel and aluminium tariffs, and a number of agricultural tariffs. So is the GSP review. The U.S. has concerns… at this stage the discussions are going on,” an Indian official speaking ahead of the 2+2 dialogue said.

Draft agreement

American interlocutors took Indian officials by surprise last month with a draft agreement that committed additional imports by India, in civilian aircraft and natural gas, The Hindu has learnt from multiple sources familiar with the developments.

Trade talks stuck as U.S. presses oil, aircraft sales to India

“Trade between countries is determined by competitive advantage and notions of enterprise of private parties. In democracies like India and the U.S., both governments have limited abilities to commit a trade value for future years…,” another Indian official said in Delhi.

Officials of the U.S. Trade Representative (USTR) office also aggregated all existing market access issues with India in the negotiations that were initially planned on questions related to the American review of India’s Generalised System of Preferences (GSP) status and the steel and aluminium tariffs imposed by the Trump administration. With talks in stalemate, the U.S is proceeding with its review of India’s GSP status and India is moving ahead with retaliatory tariffs. Postponed twice, India’s retaliatory tariffs are now set to come into force on September 18.

US Secretary of state Michael R. Pompeo being received by External Affairs Minister Sushma Swaraj in New Delhi on Wednesday

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Meanwhile, there is a shadow of uncertainty over the Trade Policy Forum (TPF) that was announced for the last week of October. India was expecting to negotiate general market access issues at the TPF, but the USTR wanted all of them resolved beforehand. USTR Robert Lighthizer and Commerce Secretary Wilbur Ross were expected to travel to New Delhi for TPF and the Commercial Dialogue between the two countries in the last week of October, but these parallel events could be postponed, sources told The Hindu. Deputy USTR Jeffrey Gerrish, called off a trip to New Delhi scheduled for this week, but that could be rescheduled for later this month.

Pointing out that there has been a decrease in the deficit last year by about 5% or about $1.5 Bn, the first Indian official said. “..this is because US exports have increased by 10%. ..we are importing gas and oil from the United States. ..According to ballpark figures, this calendar year we are likely to import up to US $2.5 billion in oil and gas. This is something we would like the US to acknowledge.”

The USTR had launched a review of India’s GSP status, that allows preferential treatment to certain number of specified goods from beneficiary countries, following complaints from AdvaDed, or Advanced Medical Technology Association, a group of companies that exports medical devices to India and a dairy association. Earlier signals from the USTR suggested there could be a resolution, with India changing its price control regime in medical devices by moving on to the more acceptable instrument of trade margin rationalisation, and the US discontinuing its GSP review and granting exemptions for India from the steel and aluminium tariffs.

But the draft agreement prepared by the USTR sought concessions from India on Compulsory Registration Order that governs standards in telecom equipment, American exports of boric acid, pork, poultry and dairy. “In fact, the entire gamut of market access issues that the U.S has been raising for long,” said a business leader who is familiar with the content. “We would like the US to understand that there are different ways of addressing the trade deficit. One of them is to address issues of direct concern, but the other is to look at new ways and new products and services to buy and sell both ways. But I can’t comment on what the outcome of these talks will be as discussions are still underway,” said the first official.

“The growth in civil aviation sector has resulted in placement of higher orders with Boeing by Indian airline operators. With the US restarting oil and natural gas exports Indian imports in these sectors have been going up. In the first six months of this year, US exports to India have gone up by 28%vis a vis the corresponding period last year. So far as accommodating the interest areas and concern of each other both USTR and Dept of Commerce are engaging in talks to find a mutually satisfactory solution,” said the second official.

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