“Lack of parity, reciprocity and asymmetrical demands from the US stalled the trade talks that could have resulted in an interim agreement on Tuesday," said a US-based person familiar with the discussions, requesting anonymity.
The US raised the bar very high for market access in India, covering a whole lot of tariff-reductions for American products, including the removal of duties India had placed in retaliation for steel and aluminium products that the US had imposed under section 232 provisions last year, and changes in Indian rules, including sanitary and phyto-sanitary provisions. The US also demanded sweeping changes to e-commerce laws, including storing of the data as well as for access to cloud-computing, the analyst added.
The list of tariff reductions sought by the US include a range of agricultural products, dairy products, pricing of pharmaceutical stents used by cardiac patients and knee implants, among others medical devices, and information and technology products.
In return, Washington was willing to restore only 50% of the benefits accorded to Indian exporters under the GSP scheme that was terminated by President Trump on 5 June.
India maintained that it was improper to link the removal of the retaliatory tariffs on American products that were imposed in response to the US’s action last year, to the partial restoration of the GSP benefits, according to several people familiar with the talks.
Under the World Trade Organization (WTO) rules, India is entitled to impose retaliatory tariffs on American products, following withdrawal of the GSP scheme, as it was inconsistent with the US’s obligations under the Enabling clause of WTO rules, said a person familiar with the discussions.
But India did not impose retaliatory measures in response to the termination of the GSP scheme. India had imposed retaliatory duties on American products in response to the US’ tariffs on steel and aluminium under Section 232 provisions. Therefore, the US’ insistence to link the removal of benefits accorded under the GSP scheme to India’s retaliatory duties on American products in response to the Section 232 tariffs on steel and aluminium was asymmetrical.
Moreover, at a time when the US is currently engaged in a trade dispute with India over the tariffs on Information Technology Agreement (ITA) products at WTO along with the European Union and Taipei among others, the US negotiators pressed India to eliminate tariffs on various ITA products for concluding the interim agreement, analysts said.
“It is a classic case of US’s trade negotiating strategy where in Washington raises the bar so high that it would become difficult other parties to agree to even a quarter of their demands," said an European analyst, who asked not to be identified.
If the negotiations on the interim deal are any indication, India will have tough time negotiating a bilateral trade agreement with the US, given the long list of demands that the US had delivered to India, several analysts said.