Proposed India-US trade pact must not go beyond tariffs, say experts

Negotiations for the proposed India-US bilateral trade agreement (BTA) need to be mostly restricted to tariffs as any widening of coverage could open a “Pandora’s box” of issues including intellectual property rights, e-commerce & data protection and government procurement that New Delhi has mostly avoided in its trade pacts to preserve its policy space, trade experts have said.

“The issue now seems to be how much more will we bend. That is the key question. If we go beyond tariffs, a whole Pandora’s box of all `behind-the- border barriers’ get open,” said Biswajit Dhar, Distinguished Professor, Council for Social Development.

As New Delhi does not want to lose its sovereign policy space in sensitive areas such as IPR, data protection, government procurement and labour, it has mostly excluded meaningful commitments in these areas in the free trade pacts it has forged with other trade partners. However, given the US’ interest in these areas, there is a concern that if the scope of the BTA is widened, there would be pressure on India to include them. “At the negotiating table, the US may demand India not just cut tariffs but also give additional concessions, such as opening government procurement, reducing agricultural subsidies, weakening patent protections, and allowing unrestricted data flows—demands India has resisted for decades,” said Ajay Srivastava from research body Global Trade and Research Initiative (GTRI).

Last week, United States Secretary of Commerce Howard Lutnick said the Donald Trump administration was keen on a broad based mega FTA under which India would bring down tariffs across the board and not negotiate a product-by-product trade deal. India’s tariffs on US goods are a higher 15.30 per cent (2022) than US tariffs on Indian products at around 3.83 per cent. The Commerce Department is working on tariff cut offers to satisfy the US so that reciprocal tariffs threatened by Trump that are expected on April 2 can be avoided.  The US wants India to bring down tariffs on most products, especially automobiles, wines & spirits and agricultural items.

Instead of an FTA, India may offer a zero-for-zero tariff deal to the US by proposing to eliminate tariffs on most industrial products from the US, provided the US does the same for Indian goods, Srivastava said. The government can take a cue from the FTAs it has with other countries. India does not want to negotiate on IPRs with the US as the country has been against Section 3(d) of the Indian Patents Act, 1970, which disallows `evergreening of patents’.

In data protection and e-commerce, India wants freedom to formulate its own policy weighing sensitivities. India has also kept commitment on government procurement out of trade negotiations as it wants to protect interests of the MSME sector.