Lower duties for agri goods on cards as US confirms Donald Trump visit

US President to visit Ahmedabad and New Delhi starting Feb 24; both sides likely to sign trade deal

As White House confirms US President Donald Trump’s two-day maiden visit to India starting February 24, spotlight will be on soothing fractured trade ties with the country’s largest export destination.

A short release made by the White House late on Monday night said Trump will visit Ahmedabad and along with his wife Melania, apart from New Delhi. Ahmedabad made the cut due to the city being Prime Minister Narendra Modi’s home state and playing “an important role in Mahatma Gandhi’s life and the Indian independence movement”.

While PM Modi will be looking to cement defence ties through a deal to purchase an Integrated Air Defence Weapon System from the US, the government hopes to give an assurance to reduce duties on US agriculture products as well as provide concessions in medical devices, officials said.

Eyes on trade

On foreign policy, Trump has followed his predecessor in hailing India as a strategic partner in the Indo-Pacific region and creating an allied front with New Delhi to counter China’s growing influence across the region. It has addressed concerns elsewhere, by waiving sanctions from the Chabahar port in Iran. But in a departure from tradition, he has mounted an attack against India on trade policy and railed against high import duties and low market access for US goods. In 2019, the President started calling India a “tariff king”, complaining against high duties faced by Harley Davidson motorcycles.

While Modi had called Trump to settle the matter and reduce duties, his ensuing trip to the US in September 2019 did not lead to a trade deal, despite both sides working on it. But Trump had promised a trade deal with India “very soon”. India’s merchandise exports to the US have risen for the past four years, registering $52.4 billion in FY19, up from $47.8 billion in FY18. On the other hand, despite maintaining the same trend, import growth had been pronounced. In-bound shipments jumped to $35.5 billion from $26.6 billion in FY18.

Betting on agri

Now, while both sides continue to work on a “comprehensive trade package”, American trade officials have expressed unhappiness with New Delhi’s decision to saddle medical device imports with an additional health cess. India has said it won’t roll back the tax, but sources say the government is still considering allowing a trade margin policy for specific high-value items like coronary stents.

During his Washington DC visit in November, Commerce and Industry Minister Piyush Goyal had met Scott Walker, president of AdvaMed, the American medical device trade association. AdvaMed, considered close to Trump’s political camp, has repeatedly lobbied with the US to push India to dismantle its price cap regime for crucial medical devices. Instead, India has offered to cut duties step by step on high-value US agri imports such as almonds, walnut, apples, and wine, which were among 29 key imports from the US to see up to a 50 per cent duty hike last year.

While the government is under pressure from farm lobbies to restrict market access these products, it hopes to provide an olive branch to the Americans on the issue as of now. “Discussions on other American demands — lower duties for industrial components, engineering products and information technology goods like smart watches and iPhones — are lengthy and not expected to complete by the time of Trump’s visit”, an official said.

Higher taxes on agri goods were estimated to rake in $240 million in additional taxes. India has said the higher taxes were in response to the US imposing a 25 per cent additional levy on steel, and 10 per cent on aluminium products from India in May 2018. In return, the US has offered to step back from its aggressive posturing on ‘reciprocal taxes’. While the US has not targeted India specifically yet, it has dropped repeated hints saying tariffs on Indian imports could be raised in line with those on Chinese products.

Trade Talks

• Trump has hailed India as a strategic partner in the Indo-Pacific region

• Both sides plan on signing trade deal, but key issues like higher duty on US medical goods remain

• The government is likely to offer a rollback of duties on 29 US agri goods

• Talks on market access issues for automobiles, engineering & IT goods may continue

• India hopes to secure another commitment from the US to source military hardware