India, US expected to sign interim trade agreement today

The interim trade agreement would cover tariff-related concessions for US farm products, especially dairy items, pricing of pharmaceutical products such as stents and knee implants, and information and communication technology products.

In return for more than a billion dollars worth of trade-related concessions from India, Washington would partially restore benefits accorded to Indian exporters under the Generalized System of Preference (GSP) that was arbitrarily terminated by President Donald Trump, effective 5 June.

The gains from the limited opening-up of the GSP window for Indian products on Tuesday are estimated around $200 million. India could also get some additional market access for some of its domestic agricultural products such as grapes and pomegranates.

The US has delivered a long list of demands to the Indian negotiators to be addressed in the next two months before a possible visit by Trump to New Delhi in November, said a Washington-based trade analyst.

India will be required to address the US’ concerns in various areas, including pricing of medical devises, stringent enforcement intellectual property provisions for pharmaceutical products, relaxation of Indian laws covering e-commerce and digital trade in which Amazon and Wallmart have a significant stake, and various sanitary and phyto-sanitary measures.

Washington’s wish list for improvements in the Indian trade policies seems somewhat like the arbitrary prices set for goods in the Cairo’s famous Khan el-Khalili market, the analyst said.

On Saturday, Indian Liquefied Natural Gas importer Petronet has decided to invest $ 2.5 billion in American company Tellurian Inc for importing five million tonnes of LNG a year at prices that are yet to be disclosed.

Unlike the ongoing trade negotiations between the US and China at the deputy-level officials in Washington, where there is hard bargaining for dollar-and-cent gains, the negotiations between the US and India seem to be tilted largely in favor of the US, the analyst said.

Even though the US is treaty-bound to restore the GSP benefits under the current multilateral trade rules, Washington has succeeded in extracting a huge price from the Narendra Modi government by prying open the Indian market for heavily-subsidized American farm and dairy products, said a South American trade analyst, who asked not to be quoted.

In effect, for a violation committed by Washington through the termination of the GSP program, India is being asked to pay a price for a partial rectification of that violation, said a legal analyst, who asked not to be quoted.

GSP programs offer a margin of preference in the tariffs of developing countries’ exports to developed countries in a move to increase competitiveness. Indian exporters secured market access benefits to the tune of more than $ 5.6 billion in the American market under the GSP scheme.

The GSP scheme was legitimized through what is called the Enabiling Clause at the end of the Tokyo Round of General Agreement on Tariffs and Trade (GATT) negotiations in 1979. The Enabling clause which became part of the WTO’s rulebook stated unambiguously that the developed countries such as the US and the EU among others do not expect the developing countries in course of trade negotiations or bilateral trade relations “to make contributions which are inconsistent with their individual development, financial and trade needs."

But, for the Trump administration, international trade rules are an anathema and irrelevant in the pursuit of America-First trade policies. Instead of launching a trade dispute against Washington at the WTO for violating the Enabling Clause, India seems to have decided to pay a price for a violation committed by the US to rectify that violation partially, said a European trade law analyst, who asked not to be quoted.