Politico says this week that President Donald Trump has been anticipating a warm welcome in India, but that the nation has been reluctant to give the administration “even a small trade victory.”
Over the last few weeks, U.S. officials have “struggled to clinch a miniature agreement” that could result in some modest additional access for U.S. medical devices, motorcycles and milk products in a market of more than 1.3 billion people.
As a result, the president moved quickly to tamp down expectations, including that a “big deal” may only be possible “after he wins a second term.” U.S. Trade Representative Robert Lighthizer did not plan to travel to India with the president, further diminishing any chance for substantial results, nor did he go to India ahead of the president’s visit, also dampening expectations for a deal.
“We may make a tremendous deal there -- or maybe we’ll slow it down. We’ll do it after the election. I think that could happen too,” the president said late last week.
A senior administration official said a "wide scope" of issues is complicating progress toward a mini trade deal. "We want to address a lot of concerns and we’re not quite there yet.” He noted that discussions with the prime minister about these concerns are expected, Politico said.
India is expected to announce some significant purchases of U.S. energy and defense products but the administration’s fixation with imbalanced trading relationships is likely impeding any willingness to offer New Delhi concessions, Politico said.
India is the United States’ ninth-largest trading partner and bought about $34 billion worth of goods in 2019 -- just a fraction of the $256 billion exported to Mexico, the top destination for U.S. goods last year.
The U.S.-Indian trade deficit was $24 billion last year while India's exports to the U.S. grew much faster than U.S. exports to India. Politico thinks these statistics could be driving the president’s reluctance to give India what it really wants -- access again to the U.S. Generalized System of Preferences, a tariff-cutting program for developing countries that discounts duties on roughly $6 billion worth of imports.
Policies that have fiercely guarded India's markets have been the bane of multiple previous U.S. administrations. Even now, as India’s economy slumps further and pressure from neighboring China grows, New Delhi has continued to make protective moves including a multiyear "Make in India" initiative aimed at bolstering the country's manufacturing sector through local sourcing and production requirements, Politico said.
India also released a national budget in late January that raised tariffs on a number of products that were under consideration to be cut or eliminated under a mini-agreement with the U.S.
U.S.-India Business Council President Nisha Biswal said India’s tariff increases on walnuts, medical devices and other goods that were to be part of a trade deal further “complicated” the talks. The negotiations also got hung up on details related to increasing access for U.S. dairy products and credit card companies.
Modi’s latest actions may reflect efforts to stem a tide of cheap, Chinese imports where a significant portion of the population still lives in poverty. India was also likely emboldened by the U.S. and other countries to stand firm or ramp up its tariffs.
For months, administration officials have weighed the launch of a so-called Section 301 trade investigation, a law that gives the president broad leeway to impose trade restrictions to address unfair trade actions. Trump used the same authority on China, which resulted in tariffs on hundreds of billions worth of imports — but no final decision has been made on whether to apply it to India.
At least this week, the President may be content to maintain the warm relationship with a leader he views as a kindred spirit who can mobilize the masses of supporters the president relishes. Modi’s visit to Houston in September where he held a joint rally with Trump brought the president one of his largest crowds.
U.S. businesses were hoping a limited trade package would be a confidence-building move for a more comprehensive negotiation. "We are fundamentally looking at an Indian approach to trade that is still emerging and evolving from a more protectionist or closed trading system to a more open one," an administration official told Politico.
So, we will see. India’s trade policies have long been difficult and highly political — and the growing global tensions and intensifying fears of a destructive coronavirus outbreak appear to be among several key economic and social threats lurking ahead, Washington Insider believes.
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