Union Commerce Minister Piyush Goyal on Thursday said that a trade deal between India and the United States will only take effect once Washington ensures a clear tariff advantage for New Delhi over competitors.
Speaking at the India Global Forum in London, Goyal said the agreement had already been agreed to by both sides in February, but its implementation depends on finalising a “competitive advantage” for India compared with countries such as Vietnam, Thailand, the Philippines, Indonesia, Malaysia, China, Bangladesh and Sri Lanka.
Goyal added that the US must find appropriate tools and legal backing to ensure this outcome. “The day that happens, the deal is on,” he added.
The commerce minister said that the negotiations between the two countries had centred on reducing tariffs to 18% from 50%, which he described as creating an advantage for India over several competing economies.
“We were lower than all our neighbouring countries, lower than all the ASEAN [Association of Southeast Asian Nations] countries other than Singapore,” Goyal said. “And that is why the deal was attractive for us.”
He added that with changes in the US tariff system following a US Supreme Court ruling and the introduction of a temporary 10% tariff that expires on July 24, further work was needed before the bilateral agreement could be implemented.
The minister said that both sides are continuing discussions but reiterated that “a free trade agreement is basically about getting a comparative advantage over your competitors for market access”.
Goyal’s comments came amid uncertainty about the India-US negotiations on the trade deal.
The trade deal uncertainty
After an interim bilateral trade deal was agreed on February 2, US tariffs on Indian goods would have been reduced to 18% from a combined rate of 50%. The earlier rate of 50% had included a punitive levy of 25% imposed in August over India’s purchase of Russian oil.
However, negotiations on the final deal were postponed after the US Supreme Court on February 20 struck down Trump’s global tariffs, ruling that he had exceeded his authority.
In response, Trump imposed a temporary 10% tariff on goods imported into the US, citing his authority under the 1974 Trade Act. The new tariff rate is for a maximum of 150 days, unless the US Congress approves an extension.
On February 21, the US president said that he was increasing the tariffs to the “fully allowed, and legally tested” level of 15% from 10% with immediate effect. However, it is unclear as to when the increased tariff rate would take effect.
This has left the status of US’ trade deals with countries, including India, unclear.
On June 4, Trump said that the two sides would soon reach the trade agreement, while claiming that New Delhi had for years “taken advantage” of Washington but the relationship had been reversed.
Written by Sara Varghese. Edited by Nachiket Deuskar.
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