India Has Just Made Mega Concessions to lock down a 500 billion trade deal with the U.S. Here is what they compromise
New Delhi did not go into the India US 500 billion trade deal with no strings attached. It was prepared to negotiate and not a cheap price was it.
The dust is now finally settling on one of the most discussed recent trade deals. India and the United States have had an interim trade agreement, and the information demonstrates to which extent New Delhi went in order to make Washington content.
The question is, what was on the table of India? Quite a lot, as it turns out.
Tariff Cuts, Access to the Markets and An Entire Lot of Flexibility.
India has been willing to cut tariffs on a strengthened variety of American products. We are discussing discounts on such products as high-end motorcycles, bourbon whiskey, almonds, apples and machinery used in industries. These tariffs were agonizingly high over the years and the American firms have been crying over them for more than a decade.
Harley-Davidson is a case in point. That brand was used as a symbol of the trade friction between the two countries. It was raised almost every time President Donald Trump was talking about India. However, these days, India has greatly reduced the tariffs of giant American bikes. It is more of a symbolic victory of Washington, though the number of the Harleys sold in India may not be high. But it is not just motorcycles and whiskey that are concessions.
America has as well opened its doors wider to the Indian agricultural produce. In this respect, it is a very sensitive area within the country since Indian farmers fear being undercut due to low-cost imports. But the ruling government in New Delhi made a clear decision that the greater price was the political risk of the greater India US 500 billion trade deal.
Why India Agreed to All This
The explanation is simple. India seeks to cushion its huge exports into the American market through the India US 500 billion trade deal. The US is still among the largest trading partners of India and the two-way trade is surging towards the analysis of 500 billion. Indian IT companies, textile exporters, pharmaceutical firms, and millions of small businesses that cannot afford Indian products without American consumers would suffer because they would lose access to that or would suffer brutal retaliation tariffs.
It was also under the mounting pressure of the Trump administration, which was outspoken on the issue of imbalance in the trade. The US has long claimed that the relationship is being lopsided towards India and she is not fair about accessing markets. You may disagree with that framing or not, but that offered great leverage to American negotiators at the table.
India basically counted and figured that it is better to give ground on tariffs now than battle an out and out war in favor of trade in the future.
What India Gets in Return
This is where the interest trivializes. India in turn is reported to gain some breathing room on counter-tariffs which the US had been threatening under the India US 500 billion trade deal. It is also projected that there will be ease in exporting Indian services especially in the technology and the professional services industry.
To the Indian IT giants such as TCS, Infosys and Wipro, it is a great victory to anything that makes the American market friendly. It is these companies that attract billions of dollars each year from clients in the US. All of that would have been jeopardized by trade war.
Talk is also going on of closer defense procurement and energy trade cooperation which would have long term strategic advantages to India.
The Bigger Picture
This is not the end of the book. Both parties have termed it as an interim accord implying that some additional bargaining is still to be done beyond the India US 500 billion trade deal. Harder ones such as digital trade regulations, the localization of data, and e-commerce regulations are yet to be brought onto the table and will be much more difficult to solve.
However, both governments are declaring a victory both in the short run. The team of Modi is able to claim that they saved the export relation. The Trump team gets to demonstrate that they were able to elicit concessions out of what they have so far accused of being a protectionist country.
What follows is really the question. Will India be pressured to become more open? And will Indian farmers and small manufacturers and domestic industries be pricked by the influx of cheaper American products?
Such answers will not be today. However, this business has established the course, and it is too late to turn back.
Stay tuned. This relationship might also be transformed by the next series of negotiations.
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