As India moves away from China in the backdrop of the clash in Ladakh, the Centre is keen to have another go at negotiating the India-United States Free Trade Agreement, Business Standard has learnt. This, officials believe, can lead to an effective trading bloc against the China-led Regional Comprehensive Economic Partnership.
The same officials however, in the Finance and Commerce Ministries, say that the government is being realistic, and because of the Covid-19 pandemic and the upcoming US Presidential elections in November, the business end of the negotiations will only happen next year, though work is likely to begin now.
"The current situation is that non-alignment is not an option, and RCEP is out of the question for us. The recent clashes have given us a clear choice on matters of trade and commerce, and that is to go with US to counter China," a senior government official said, and added that discussions on the matter have begun with the United States.
“We have been here before, and we will not be seen as desperate. We are going back to the negotiating table in good faith,” a second official said.
Late on Thursday, the US hinted that it was open to restoring trade benefits under its Generalized System of Preferences (GSP) scheme to India provided it got a 'counterbalancing proposal'. Reinstatement of GSP benefits has remained a key demand from New Delhi but back in February, the US had classified India as a developed economy, ineligible for benefits given to developing countries.
Now, US Trade Representative Robert Lighthizer, Trump's point man on trade, has told members of the US Senate Finance Committee that trade talks with India are ongoing.
As per officials, India’s next proposal for trade talks with the United States includes a step by step reduction of import duties on high value US agricultural products, trade margin policy for medical devices and a promise to continue talks on reducing price restrictions on American tech goods. India's proposal will also be conditional upon the US backing off from its tough stance on digital services taxes imposed by India.
The GSP is America’s oldest preferential trade scheme, which offered Indian exporters tariff-free access to the US until June 2019, when all benefits were suspended. While India has earlier stated it would not pursue GSP benefits further, sources say that position is expected to change.
India’s total benefits from GSP tariff exemptions amounted to $260 million in 2018, according to the data from the Office of the United States Trade Representative. However, this was only a small portion of India’s overall exports to the US in the same period, which stood at $51.4 billion.
Officials haven't heard much from Lighthizer since he cancelled his visit to India during Trump's visit to India in February, 2020. Now, they say talks are again set to begin soon. However, they caution that details will need time to straighten out given the ongoing pandemic, upcoming presidential elections in the US and the fact that both nations have been at this particular juncture in talks before as well.
The US wants India to slash its tariff rates and further open up its markets to American products. Trade talks have oscillated back and forth on these issues over the past 2-years. The differences had remained too large to bridge despite a push by both leaders. Sources confirm that talks had entered frenzied pace just before the Howdy Modi event in Houston, Texas in September, 2019 as well as the Namaste Trump gala in Ahmedabad in February, 2020.