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New Delhi: Prime Minister Narendra Modi and US President Donald Trump are likely to unveil a much-awaited trade package — which will ease the entry of American goods into Indian markets — during their bilateral meeting in New York Tuesday.

The trade pact, which has been in the works for more than a year now, will be the first step towards both sides announcing a free trade agreement (FTA) in the coming years.

The “limited” trade package was given a “final shape” when Commerce and Industry Minister Piyush Goyal met US Trade Representative (USTR) Robert Lighthizer in New York Monday, sources told ThePrint.

Goyal flew to the US Monday morning to hammer out a deal that would be “mutually beneficial” and “balanced” for both the countries, according to the sources.

In July, after multiple rounds of negotiations for more than a year, the US and India agreed to sign the trade deal. Goyal has been planning to visit the US since July to meet the USTR in this regard, but it did not work out as Lighthizer wanted a “concrete deal” before both sides begin talks on an FTA.

A similar trade package was discussed last year too under former commerce and industry minister Suresh Prabhu. But with the approaching Lok Sabha elections and rising trade tensions between the US and China, the matter was kept on the backburner.

The discussions on the package began after a major trade tiff erupted between Washington and New Delhi when the US, in March 2018, put Indian shipments of steel and aluminium under Section 232 of the US Trade Expansion Act of 1962 on national security grounds and raised duties on them.

Owing to such trade tensions, the Trump administration had even refused to hold the US-India Trade Policy Forum in 2018 — the annual dialogue on trade between both the countries.

Tensions deepened further in May this year when the US withdrew preferential trade status, also known as the Generalised System of Preferences (GSP), from India. Following this, India put retaliatory tariffs on 28 American goods in June.

The withdrawal of GSP came as a major setback to the Modi government. Under the GSP programme, which has been in place since 1976, the US grants some Indian exports preferential or duty-free access into the American markets. The benefits amount to a gain of around $200 million for India.

Also read: US-India trade deal has to be mutually balanced, address concerns of both nations: Gokhale

What will the trade pact offer?

The proposed trade package, sources said, is going to be “limited” in nature as it will target only the “low-hanging fruits” in terms of trade benefits.

If the trade deal finally fructifies, the US is most likely to reinstate the GSP status for India while waving off tariffs on Indian steel and aluminium goods, sources added.

On the other hand, New Delhi is expected to ease the entry of US agriculture goods into the Indian markets by lowering tariffs. Similarly, US exports of information and communications technology (ICT) products, especially mobile phones, will see a reduction in the tariffs, sources added.

India is also likely to commit a further cut in duties on Harley Davidson bikes and relax import duties on American medical devices. Washington is pushing India to not to put price caps on certain medical devices like stents and knee implants. On Harley motorcycles, the US has asked India to lower the tariffs from 50 per cent on all kinds of engine capacities.

Trade of goods and services between the US and India reached $142 billion in 2018, while the trade deficit is hovering at around $24 billion.

Aggressive statement by Modi, says Trump

The meeting between Trump and Modi will take place a day after the US President held a bilateral meeting with Pakistan Prime Minister Imran Khan during which both sides discussed the ongoing lockdown in Kashmir.

During the meeting, Trump again offered to intervene between India and Pakistan on Kashmir, stating that he was “ready, willing and able” to mediate if both countries wanted it. “I think I’d be an extremely good arbitrator,” he said.

Sources said the Kashmir issue is likely to be raised during Trump’s meeting with Modi also, but it would not come up in public.

During his meeting with Khan, Trump said that PM Modi made “a very aggressive statement” at the ‘Howdy, Modi!’ event in Houston Sunday.

Trump was referring to Modi’s statement that masterminds behind the 9/11 terror attack in the US in 2001 and 26/11 Mumbai attack in 2008 were all found in one country.

Also read: Jaishankar says US-India trade will reach ‘higher level’, hints at likely deal

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