The India-US trade negotiations expressed in the joint statement have reached a framework of an interim agreement as an expression of commitment to broader India-US Bilateral Trade Agreements. The US President Trump seems to be committed to reducing trade deficits with countries like China, the EU, Vietnam, Japan, India and Canada pursuing his ‘America First’ policy. But surprisingly, as the joint statement which assures more market access and stability in supply chains shows, India’s Prime Minister who signed this agreement has also succumbed to the ‘America First’ policy rather than defending the interests of India. The PMO’s managing consent industry is busy portraying this negotiation as win-win to be celebrated, the usual mode of salvaging the Prime Minister from important concerns that matter to the people of India. This trade negotiation also expresses commitment, or an “intent” as it is in the revised fact sheet, to double India’s merchandise import from the US to $500 billion by 2030 as part of Mission 500 Initiative of US-India COMPACT bilateral trade agreement 2025. The US is India’s biggest trading partner accounting 17 per cent of India’s merchandise trade while India’s share in US merchandise imports is 2.8 to 3 per cent. Hence the dependence of India’s exports on the US market is relatively greater than US exports’ dependence on India’s market. India’s trade relation with the US is important but so is the relation with partner countries such as Russia and China. The trade negotiation implicitly accepts sourcing crude oil from the US and Venezuela instead of continuing to purchase Russian oil. This will end up increasing our import bill to appease the US. This might weaken India’s strategic partnership with Russia which is important for the fact that 70-85 per cent of India’s defence platforms are of Russian origin.

‘America First’ Deal

The highlight of the trade negotiation framework is that US agreed to reduce tariffs on India’s exports to 18 per cent which was 25 per cent initially when Trump tariff was slapped and added with a punitive tariff of 25 per cent pushing it up to 50 per cent. Initially imposing abnormally high tariffs upon exports from several countries was part of the US strategy to bring those countries on negotiation table and force them to accept higher tariffs compared to the pre-Trump era. The average tariff rate imposed by India on US imports was 17 per cent and for agricultural products was 39 per cent. Trade weighted tariff which considers the share of US import in total imports of India was 12 per cent on average and for agricultural products it was 65 per cent. This high tariff on US goods would come down to zero according to the current negotiation framework virtually opening floodgates for US products in India’s market. On the other hand, average tariff imposed on Indian products exported to the US market was as low as 3.3 per cent and trade-weighted average tariff turns out to be 2.2 per cent. Hence 2-3 per cent tariff rate is now increased to 18 percent. In case of agricultural products, the US imposes an average tariff of 5 per cent and the corresponding trade-weighted average tariff is 4 per cent. Therefore, this negotiation primarily opens India’s market for US products which was the prime agenda of Trump’s ‘America First’ policy while tariff on Indian exports has been increased from 3-4 per cent to 18 per cent.

Trump has made American corporates and his farmers constituency happy since they would be able to sell their highly subsidised agricultural products in Indian markets and on the other hand PM Modi and the Indian establishment want to make Indians happy just by saying that tariffs are being reduced from 50 per cent to 18 per cent although tariff on exports have actually increased! This is nothing but surrendering national interest under US pressure. Our trade volume with the US increased steadily reaching a peak of $129.4 billion and then moderated to $82.5 billion and India consistently maintained trade surplus vis-à-vis the US. India now intends to increase merchandise imports from US of value $500 billion in five years or $100 billion a year. Currently India sells goods worth $41.5 billion to the US which is to be ramped up to $100 billion a year.

Historically trade issues related to agriculture had been sensitive and farmers advocated that agriculture should be kept away from all sorts of multilateral and bilateral trade negotiations as it affects the interest of a large mass of working people. For agricultural and dairy products India historically maintained high tariffs to protect Indian farmers and producers. Apple imports were subject to a tariff rate of 50 per cent which has already been cut down to 15 per cent and will be reduced further. Cut chicken legs or skimmed milk used to attract high tariffs to the tune of 100 per cent and 60 per cent respectively. If these are brought down as the US pushes hard during future negotiations, Indian farmers will be heavily hit. On the other hand, products such as processed shrimp, natural honey and vegetable extracts exports to the US used to face very low tariff 0-5 per cent which will now attract 18 per cent tariff.

Surrendering Sovereignty

India also has the provision of imposing non-tariff barriers such as complete ban, import licensing and government-controlled imports. India used to have a stringent regulatory framework to restrict dairy products from animals that are fed ruminant-derived ingredients and genetically modified soy and corn. Primary concern in these restrictions relate to cultural preferences in case of dairy products and for GM crops the major concern is if they enter the food chain, it may have serious health effects. In India, soybeans are not popularly consumed directly, rather most of the soy is used to produce soybean oil. According to the current negotiations, India will be importing soybean oil from the US which is going to adversely affect soy farmers and oil mills in India. The US also wants to sell genetically modified corn in India. But since GM corn would not be allowed, they would enter as dried distillers’ grains to be used in the production of animal feed. India, as the agreement says, will eliminate or reduce tariffs on all US industrial goods and a wide range of food and agricultural products, including dried distillers’ grains (DDGs), red sorghum, tree nuts, fresh and processed fruit, certain pulses, soybean oil, wine and spirits, and additional products. In sum it is a package for wholesale entry for US manufactured goods and agricultural products to India. It seems India is also committed to relax digital service taxes on revenue earned from India by providing digital service. Most importantly, the US is keen to impose restrictions on data localisation that keeps data generation, sharing and processing within the boundaries of the nation which hosts the server. In the revised fact sheet, even if the part related to digital service has been erased, the intent of the trade deal raises serious concern about cyber and digital privacy and sovereignty.

It is utterly baffling how the Prime Minister of India could sign a trade deal with the US that threatens our energy security, cyber and digital sovereignty and opens Indian market with zero tariff for US energy products, aircraft and aircraft parts, precious metals, technology products, agricultural products, coking coal and ICT products. This is nothing but a wholesale surrender to the US which is going to threaten the livelihood of Indian farmers and manufacturers. Over the years, there had been a significant rise in import content in many sectors in India, this is not only a leakage in domestic demand but also restricts potential for employment. The government that tom-toms ‘Make in India’ and ‘Atmanirbhar Bharat’ has surrendered under US pressure to the extent that India’s purchase of oil will be directly or indirectly monitored by a foreign country, US, and in case of any violation India must face the consequence of higher tariff. This reminds us about colonial control infringing upon the autonomy and sovereignty of a country to allocate and mobilise resources. It is unfortunate that the government representing an economy currently experiencing highest GDP growth and with a population of 1.45 billion stands incapacitated to protect the interest of the people. It seems that the pseudo-nationalism of the BJP gets excited only when it can be channelised to hate campaigns against fellow minority citizens within India, otherwise they are ready to surrender national interest and succumb to the imperial agenda of the US although with a pretence of being a potential Vishwa guru!