New Delhi: In a major boost to bilateral trade, India and the United States have finalised an interim trade agreement that promises to reshape commerce between the two economic giants. The deal notably cuts US tariffs on Indian goods to 18 per cent, while the US withdraws the additional 25 per cent duties it had previously imposed on Indian imports.
Here’s what the agreement entails:
Lower Tariffs and Market Opening
In the agreement, India has agreed to eliminate all tariffs on industrial products from the US and a large number of agricultural products, including dried distillers’ grains, red sorghum and nuts, as well as many types of both fresh and processed fruits, soybean oil, wine and spirits. The US has committed to applying an 18% tariff on key categories of Indian exports, such as text/image tags, textiles & apparel, leather & footwear, plastic & rubber, organic chemicals, home decor, and artisan goods.
Pharmaceuticals, Gems & Aircraft
Once the interim trade agreement becomes fully operational, the US will also eliminate reciprocal tariffs on several categories of products imported from India, including generic medication, gemstones & diamonds and aircraft components. In addition, certain aircraft and components for importing into the US will immediately be exempt from any duty upon importation, thereby facilitating trade between India and the US.
Non-Tariff Barriers
Both countries have agreed to work towards eliminating the many non-tariff barriers currently stopping/troubling trade between their respective countries. To accomplish this objective, India is committed to eliminating any/all barriers that may obstruct access to their market by US-produced medical devices, US-produced ICT products, and US-produced food & agricultural products, as well as creating an easier and more efficient way for companies to get through the import licensing to gain access to their market.
Huge Trade Target
India has committed to buying $500 billion worth of US products over the next five years, with major categories including energy, aircraft and their parts, precious metals, technology goods and coking coal. The two countries also intend to work together to explore technology innovations, including new uses for GPUs in data centres, as they continue to strengthen the economic and strategic basis of their relationship.
Moving Forward
The interim trade framework sets a solid foundation for both sides to continue their talks under the Broad Trade Agreement (BTA), when the US will consider requests from India regarding tariff reductions on Indian exports in order to expand market access and improve economic ties between the two nations.
This will provide a historic opportunity for India’s relationship with the US, with both countries now on track for increased trade volumes and access to each other’s markets, with a mutual goal of having $500 billion in bilateral trade in five years. This benefits traders, buyers and consumers in both India and the United States by creating greater certainty regarding future trades and increased flexibility within the trading system between those two countries.