Reciprocity, protection of farm sector key to India-US trade deal

India-US trade talks are entering a crucial phase with India making it clear that the principle of reciprocity needs to be fully honoured and that protection to sensitive areas like agriculture will not be compromised in any overarching trade agreement between the two nations.

The possibility of an interim trade agreement has gained traction following US President Donald Trump’s remarks that a big deal could be on the anvil which will open India’s markets. While India is indeed looking for early closure too, it is equally apparent that the “give and take” needs to be convincing.

The view in the Indian government is that a deal must not appear to be a one-way street and the perception has been sharpened by US negotiators referring to the need for Congressional approvals for reduction of tariffs with regard to Indian exports.

The import of agricultural products into India is perhaps the most contentious area of discussions as India’s farm economy rests on several support measures funded by the government and domestic consumption. Import of wheat and maize, particular GM produce, will be problematic.

There might be more room for accommodation with regard to fruits, lentils and pulses which are already being traded. There is more room for fresh and frozen vegetables while US exports of consumer processed foods have been growing steadily.

Talks have, however, been result-oriented and negotiators have managed to set the guide rails for a deal with the approval of respective political executives. The broad sweep nature of Trump’s comments have prompted the Opposition to seek explanations from the Modi government but the discussions are in fact highly granular and detailed. The US tends to see India’s import regulations as “politicised controls,” but this is only partly true. A system of support prices, subsidised fertilisers and government procurement are essential to India’s food security.

The optimism about India and US negotiating their no-go areas lies in the perception that India’s consumer market is growing and offers significant opportunities to US exporters who have so far found it difficult to compete with lower priced, geographically proximate suppliers in India’s neighbourhood.

According to a US department of agriculture report, agricultural exports to India are growing and include tree nuts, cotton, pulses and fresh fruit, accounting for 80% of total agricultural exports. “Agricultural-related exports to India (such as ethanol, distilled spirits, forest and seafood products) has quadrupled since 2012, reaching a record $233 million in 2016,” the report said.

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