Zero tariff strategy 'unlikely' in India-US trade pact

A “zero-for-zero” tariff strategy under the proposed bilateral trade agreement between India and the US is unlikely as the two countries are at a different level of economic development, sources said.

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The India-US trade agreement will cover several issues like goods and non-tariff barriers. The pact seeks to more than double bilateral trade to $500 billion from the current $191 billion by 2030.

An official said, “It does not happen like this that if he will do ‘zero’ in electronics, we will also do in electronics. Trade agreements do not happen like this. It is wrong thinking.”

However, according to government officials, zero-for-zero tariffs are feasible between the US and the European Union (EU) as both are developed and advanced nations.

The EU has said it had offered the US a zero-for-zero tariff deal on cars and industrial goods much before US President Donald Trump launched his trade war.

Trade experts had proposed that India could propose a zero-for-zero tariff strategy to the US for addressing America’s reciprocal tariff hikes.

India and the US have been engaged in negotiating a bilateral trade agreement since March. Both sides have targeted to conclude the first phase of the pact by September-October this year.

“The work has started for the agreement. India is far ahead of other countries in negotiating a trade deal,” the official said.

India and the US have decided to hold sector-specific talks in the coming weeks under the agreement following four days of preliminary talks that concluded on March 29.

In February, Delhi-based think tank GTRI suggested that India should propose a zero-for-zero tariff strategy to the US where it can eliminate tariffs for American imports as India would be compelled to make “difficult concessions”.

The think tank suggested that Indian policymakers should prepare a list of items without harming the domestic industry.

While the US is looking at duty concessions in sectors like certain industrial goods, automobiles (electric vehicles particularly), wines, petrochemical products, dairy, agriculture items such as apples, tree nuts and alfalfa hay, India may look at duty cuts for labour-intensive sectors like apparels, textiles, gems and jewellery, leather, plastics, chemicals, oil seeds, shrimp and horticulture products.

The US accounts for about 18 per cent of India’s total goods exports, 6.22 per cent in imports and 10.73 per cent in bilateral trade.