US-India Trade Agreement Remains Stuck Following Trump-Modi Discussion
India and the United States have been engaged in a series of discussions aimed at strengthening their comprehensive and global partnership, with Indian Prime Minister Narendra Modi emphasizing the need to take this relationship to new heights. This comes as the two nations grapple with various economic and political issues, including trade negotiations and the ongoing Russia-Ukraine conflict.
In a recent phone call to mark Modi's birthday, President Donald Trump expressed his appreciation for Modi's role in trying to end the Russia-Ukraine war. However, the US has expressed concerns over India's quality control, viewing it as a non-tariff barrier. The US has also imposed tariffs of 25 percent on many Indian imports, a move that risks straining the strategic partnership between the two countries.
India, on the other hand, has been continuing to buy diesel refined from Russian oil, a decision that has raised eyebrows in Washington. Ukraine too has been buying diesel refined from Russian oil. India has offered to cut tariffs on all American industrial goods, but with conditions to protect its sensitive sectors. The US seeks tariff parity across sectors, but India's red lines on protected sectors are a significant consideration.
The resumption of trade negotiations between India and the US was initiated following friendly messages exchanged by the leaders. There is a prospect of resetting ties between India and the US with a focus on the overall strategic relationship. However, there are red lines neither India nor the US can cross to make a full trade deal possible.
The basic premise that India will not or cannot buy US corn or stop buying Russian oil may be a significant obstacle in trade negotiations. The financial advantage of Russian oil prices is a factor influencing India's continued oil purchases. The end of the Russia-Ukraine war and the removal of US secondary sanctions are political decisions rather than economic ones.
In the meantime, India has been firm in its stance that it cannot justify opening the agriculture sector due to the potential danger to the lives and livelihoods of 700 million people dependent on dairy and food grain farming. This has put a limit on the scope of a potential trade deal, with a limited trade deal in specified sectors being a short-term solution to satisfy positive signals from the White House and the Prime Minister's Office.
As the negotiations continue, there is a growing call for the US to adopt a more pragmatic approach like the UK's free trade agreement with India, which fosters mutual prosperity without undermining Indian priorities. The future of India-US relations and the resolution of the Russia-Ukraine conflict will be closely watched in the coming months.
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