India-US Trade Talks: Zero Tariff Strategy Off the Table
Negotiations for a bilateral trade agreement between India and the United States are underway, but the proposed ‘zero-for-zero’ tariff strategy is unlikely to be included. Officials from both nations have indicated that their differing economic stages make such an approach impractical. Instead, they are focusing on a comprehensive deal that addresses a range of trade issues, aiming to significantly boost bilateral trade by 2030.
Diverging Economic Landscapes
The concept of a ‘zero-for-zero’ tariff strategy, which would involve both countries eliminating tariffs on similar products, has been deemed unrealistic by trade officials. A senior official explained that while this strategy may work between advanced economies like the US and the European Union, it does not suit the economic structures of India and the US. “Trade agreements do not happen like this — if they go zero on electronics, we will too. That is a wrong notion,” the official stated.
Instead, the focus is shifting towards a more comprehensive “package deal” that encompasses various aspects of trade, including goods, services, and non-tariff barriers. This approach aims to create a balanced framework that can accommodate the unique economic contexts of both countries.
Progress on Negotiations
Negotiations for the bilateral trade agreement commenced in March, with both nations targeting a conclusion for the first phase by September or October of this year. The ambitious goal is to more than double bilateral trade to $500 billion by 2030, a significant increase from the current figure of approximately $191 billion.
In the coming weeks, sector-specific discussions are expected to take place following four days of preliminary talks that concluded on March 29. Indian officials have expressed confidence in their readiness to negotiate trade agreements, positioning the country ahead of others in this regard.
Trade Interests and Sector-Specific Goals
The United States is seeking tariff concessions in several sectors, including industrial goods, electric vehicles, wines, petrochemicals, dairy, and various agricultural products such as apples and tree nuts. Conversely, India is likely to advocate for duty reductions in labor-intensive sectors, including textiles, garments, gems and jewelry, leather, and horticulture. The US has maintained its status as India’s largest trading partner for the past three financial years, accounting for about 18% of India’s total exports and 6.22% of its imports. In the fiscal year 2023-24, India recorded a goods trade surplus of $35.32 billion with the US, an increase from $27.7 billion in the previous year. Key exports from India to the US included drug formulations, telecom instruments, and precious stones, while imports featured crude oil and aircraft parts.
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