india

Updated: Feb 16, 2020 12:03 IST

Efforts to put together a trade agreement for announcement during President Donald Trump’s February 24-25 visit to India have suffered a setback after the US informed New Delhi of its top trade negotiator’s inability, for now, to visit the country for end-stage discussions to wrap up the deal.

India had expected to finalise the deal this week in talks with Robert Lighthizer, the top US trade administrator and negotiator who has a reputation for playing hardball. But he is understood to have conveyed his inability to travel to India in a Thursday night phone call with Union minister Piyush Goyal.

In New Delhi, diplomatic and trade stakeholders said the Narendra Modi government had some red lines on trade that it will not cross despite the US trade representative’s intensive lobbying with Goyal. India has made a full offer to the US on the proposed trade deal and the two sides were in “90% agreement” before Lighthizer decided not to go ahead with the visit.

“We have made an offer to the US with the discussions moving far beyond the usual medical devices, dairy and agricultural products. It is now the USTR’s call to make the deal possible to make the US President’s visit very successful,” said one of the key Indian officials involved in the negotiations.

New Delhi offered to help reduce the US trade deficit with India by doubling its shale oil imports from America from the current six million tonnes per annum. This move will also be in Indian interest given the escalation of political tensions in West Asia.

Although the Modi government will do its utmost to showcase the Trump visit with sizeable public participation in Ahmedabad and in New Delhi, it has moved away from measuring the success of the visit only on whether the two sides close the trade deal.

Still, Indian officials are not writing off the possibility of a deal, acknowledging its importance for President Trump. They felt frustrated, at the same time, about the United States “changing goalposts constantly” — a new wrinkle was added every time a deal seemed in sight.

Failure to get a deal, it is being said, will rob the visit of everything but “optics” and, more significantly, deliver, according to a US official, a “big setback” to bilateral ties.

The two countries are working towards a limited trade agreement that addresses some basic concerns and leaves the more intractable one for a later date, such as a Free Trade Agreement.

But their failure to agree on such a small deal has been noted for how poorly it may reflect on the visit.

“If a deal even as modest as the one being envisaged does not materialise, this visit will be primarily about optics,” said Milan Vaishnav, a South Asia expert at Carnegie, a leading think tank.

Precise details of the negotiations are hard to come by as both sides have kept a tight lid on them, and it could not be immediately ascertained what forced Lighthizer to call off the visit indefinitely. On Wednesday, it was the US demand to level the playing field for credit card companies — that India should have the same rules for US companies, MasterCard and Visa, as India’s government-backed RuPay, according to people familiar with the discussions.

A sense of despair has set in, as a result, among those involved in the trade discussions and scores of others who have closely followed them, in the last few days. Messages and texts flying between New Delhi and Washington DC have ranged in despondency from “hopes fading” to “the deal is dead”.

The more optimistic among them, however, held on to the hope that the “the top leaders”, Prime Minister Modi and President Trump, might step in at some stage to fix it.

President Trump has indicated he would not settle for anything but the “right deal” and has seemed more excited about the rally he is scheduled to address in Ahmedabad, where he expects to see “millions” of people. Crowd size matters to him, but trade matters more, and he is willing to come back empty-handed rather than settle for a weak deal.

At the same time, US officials have warned that the failure to announce a deal during the president’s visit will reflect poorly on relations between the two countries and one of them said it will be a “big setback”, seemingly putting the onus for its failure, or its unlikely success, on India.

But people familiar with the discussions said India has tried to accommodate as many of US demands as it can. It has conceded, for instance, a key US demand for removing the cap on prices of medical devices such as stents for hearts, despite the cess announced in budget.

“We have made an offer to the US with the discussions moving far beyond the usual medical devices, dairy and agricultural products. It is now the USTR’s call to make the deal possible to make the US President’s visit very successful,” said one of the key Indian officials involved in the negotiations.

India has also agreed to US demand for importing $6.5 billion worth of US goods annually in exchange for restoring special trade benefits under the Generalized System of Preferences, which were withdrawn last summer. India had first agreed to meet that figure with energy purchases, but readjusted to accommodate a US demand to buy agricultural produce from certain states such as cherries from Utah and corn from Iowa.

India has not been without blame though — slapping a cess on medical devices in the budget, for instance, was seen as a curious move in the light of how central the pricing of medical devices was to trade talks with the United States, and then duty on shelled walnuts that are imported mostly from America.

Despite the trade hiccups, bilateral defence relations are on an upswing with Boeing now approaching the Pentagon for a licence so that it can offer the latest F-15 EX fighter plane to India. Although the Modi government is totally focused on “Make in India” in the defence sector, the F-15 Eagle has a kill ratio of 140 : 0 and carries the weight of the F-16 in armaments. Apart from this India will be looking towards the US for armed drones, multi-purpose helicopters, multi-mission P8I aircraft and an additional six Apache attack helicopters.

Trump and Modi are expected to have one-to-one discussions in Ahmedabad and in New Delhi with the focus being on the Af-Pak region, China, West Asia and the Indo-Pacific. With Beijing securing its flanks in both the South China Sea and in the Indian Ocean through the Hambantota port in Sri Lanka and Gwadar in Pakistan, India needs to dominate the Indian Ocean Region first before it expands its footprint beyond Malacca, Sunda and Lombok straits.