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Info Service on WTO and Trade Issues (Feb26/10) Geneva, 9 Feb (D. Ravi Kanth) — The United States and India on 6 February announced a framework for an “Interim Agreement regarding reciprocal and mutually beneficial trade” in the run-up to negotiations on the broader US-India Bilateral Trade Agreement (BTA). The interim agreement requires India to “eliminate or reduce tariffs on all US industrial goods and a wide range of US food and agricultural products.” In return, the US will impose a reciprocal tariff of 18% on Indian products entering the American market, with some concessional tariffs for generic drugs, auto parts, and aircraft parts, according to a Joint Statement issued by the White House. The two sides claimed victory on grounds that the interim agreement addresses their specific concerns in the two-way trade between seemingly unequal partners. Indian Prime Minister Narendra Modi issued a post on X (formerly Twitter) expressing his jubilation: “Great news for India and USA! We have agreed on a framework for an Interim Trade Agreement between our two great nations.” “As India moves forward towards building a Viksit Bharat, we remain committed to building global partnerships that are future-oriented, empower our people and contribute to shared prosperity.” Later, during a visit to Malaysia, Prime Minister Modi noted somewhat proudly that his government has concluded several free trade agreements, with the latest being the one with the US. He said that the interim trade deal with the US “strengthens Make in India by opening opportunities for “farmers, entrepreneurs, MSMEs, Start-Up innovators, fishermen and more,” and by generating “large-scale employment for women and youngsters”.” However, on 7 February, India’s powerful farm association Samyukt Kisan Morcha (SKM), demanded his immediate resignation, according to a news report in The Hindu. The news report suggested that even leaders of apple and cotton growers said any relaxation on the import of cotton would be disastrous for states such as Jammu and Kashmir, Himachal Pradesh, Maharashtra, and Gujarat. US RESPONSE The US Trade Representative (USTR), Ambassador Jamieson Greer, praised his own President’s “dealmaking” prowess for “unlocking one of the largest economies in the world for American workers and producers, lowering tariffs for all US industrial goods and a wide array of agricultural products.” Amid what appears to be mutual self-praise and exuberance aimed at appeasing domestic constituencies, several analysts said that the details of who secured maximum gains under the threat of high US reciprocal tariffs seem somewhat obvious: Washington walked away with maximum benefits. A former Indian tariff official, who played a major role in several rounds of trade negotiations in the past, said that the Indian government has not clarified whether the US will continue to impose existing WTO-bound Most Favoured Nation (MFN) tariffs – which include tariff peaks for man-made fibres and leather items – in addition to the agreed reciprocal tariff of 18%. If the two tariffs – both reciprocal and MFN-bound – continue on Indian products like garments and leather goods, it will be a huge blow to Indian exports, the official said. So far, the two sides have remained conspicuously silent on whether the US will impose the reciprocal tariff of 18% over and above the existing tariffs, the official added. Besides, the interim deal appears to be asymmetrical in all aspects, said a former Indian trade envoy, who asked not to be quoted. Aside from the gross asymmetrical nature of the interim agreement, the two countries exist under vastly unequal economic conditions. For example, the US, with a population of 338 million, posted a per capita income of $76,477 last year, while India, home to 1.4 billion people, recorded a per capita income of just $2,940. The US counts roughly 30,000 wealthy farmers; India has close to 800 million farmers living “cheek by jowl”, many on the brink of subsistence. Treating these two economies as equals in reciprocal trade liberalization is not balance, it is distortion, this writer argued in a column in The Federal, an internet publication. “HISTORIC MILESTONE” According to a United States-India Joint Statement issued by the White House on 6 February, the framework for an Interim Agreement “reaffirms the countries’ commitment to the broader US-India Bilateral Trade Agreement (BTA) negotiations, launched by President Donald J. Trump and Prime Minister Narendra Modi on February 13, 2025, which will include additional market access commitments and support more resilient supply chains.” It states, “The Interim Agreement between the United States and India will represent a historic milestone in our countries’ partnership, demonstrating a common commitment to reciprocal and balanced trade based on mutual interests and concrete outcomes.” However, it remains moot whether the US will remove the reciprocal tariffs if trade reaches a balanced level after India’s trade surplus with the US is reduced to a trade deficit, said a former Indian trade envoy, who asked not to be quoted. According to the Joint Statement, the key terms of the Interim Agreement between the United States and India include: * India will eliminate or reduce tariffs on all US industrial goods and a wide range of US food and agricultural products, including dried distillers’ grains (DDGs or ethanol), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil [in which 94% GM ingredients are included, contrary to the Indian commerce minister’s claim that no GM products are being allowed], wine and spirits, and additional products. * The United States will apply a reciprocal tariff rate of 18 percent under Executive Order 14257 of April 2, 2025, on originating goods of India, including textiles and apparel, leather and footwear, plastic and rubber, organic chemicals, home decor, artisanal products, and certain machinery. Subject to the successful conclusion of the Interim Agreement, the US will remove the reciprocal tariff on a wide range of goods identified in the Potential Tariff Adjustments for Aligned Partners Annex to Executive Order 14346 of September 5, 2025, including generic pharmaceuticals, gems and diamonds, and aircraft parts. * The United States will also remove tariffs on certain aircraft and aircraft parts of India imposed to eliminate threats to national security under Proclamations 9704, 9705, and 10962 [incidentally, under GATT 1947 tariff commitments, India has bound its tariff on aircraft parts at 3%, according to an Indian tariff expert]. Similarly, consistent with US national security requirements, India will receive a preferential tariff rate quota for automotive parts subject to tariffs imposed under Proclamation 9888. Contingent on the findings of the US Section 232 investigation of pharmaceuticals and pharmaceutical ingredients, India will receive negotiated outcomes for generic pharmaceuticals and ingredients. * The United States and India commit to provide each other preferential market access in sectors of respective interest on a sustained basis. * The United States and India will establish rules of origin that ensure that the benefits of the Agreement accrue predominantly to the United States and India [apparently to insulate against Chinese products being re-labelled, since India is one of the largest importers of Chinese Active Pharmaceutical Ingredients]. * The United States and India will address non-tariff barriers that affect bilateral trade. India agrees to address long-standing barriers to trade in US medical devices; eliminate restrictive import licensing procedures that delay market access for US Information and Communication Technology (ICT) goods; and determine within six months of the Agreement’s entry into force, whether US-developed or international standards are acceptable for US exports entering the Indian market in identified sectors. India also agrees to address long-standing non-tariff barriers to trade in US food and agricultural products [so that India is under the constant threat of additional tariffs over and above reciprocal tariffs if it does not remove the non-tariff barriers, said a tariff official]. * For the purposes of enhancing ease of compliance with applicable technical regulations, the United States and India intend to discuss their respective standards and conformity assessment procedures for mutually agreed sectors. * In the event of any changes to the agreed-upon tariffs of either country, the United States and India agree that the other country may modify its commitments. * The United States and India will work towards further expanding market access opportunities through the negotiations of the BTA. The United States affirms that it intends to take into consideration India’s request to continue working to lower tariffs on Indian goods. * The United States and India agree to strengthen economic security alignment to enhance supply chain resilience and innovation through complementary actions to address non-market policies of third parties, as well as cooperation on inbound and outbound investment reviews and export controls. * India intends to purchase $500 billion of US energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next 5 years. India and the United States will significantly increase trade in technology products, including Graphics Processing Units and other goods used in data centers, and expand joint technology cooperation [several analysts claim this condition could lead India into “data center colonization”]. * The United States and India commit to address discriminatory or burdensome practices and other barriers to digital trade and to set a clear pathway to achieve robust digital trade rules as part of the BTA [this poses a litmus test for the Indian government’s resolve on whether it will insist on terminating the moratorium on customs duties on electronic transmissions at the World Trade Organization’s 14th ministerial conference in Yaounde, Cameroon next month]. The Joint Statement says the two sides “will promptly implement this framework and work towards finalizing the Interim Agreement with a view to concluding a mutually beneficial BTA consistent with the roadmap agreed in the Terms of Reference.” It appears that India has seemingly pushed itself into a proverbial trap because Washington will not show any concern for poor Indian farmers or Indian MSMEs in the coming months and years amid increased US exports of agriculture and industrial products. Further, India, along with several other countries claiming success from their respective bilateral framework agreements with the US, risk becoming parties to the alleged violation of the core provisions of Article I of the GATT on MFN treatment as well as the sanctity of bound tariff commitments enshrined in Article II of the GATT, due to the US actions, said several analysts, who asked not to be quoted. +
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