After Reading This Article You Can Solve This UPSC Model Question:
Examine the potential benefits and concerns arising from the interim U.S.–India trade deal. How can India balance trade liberalisation with protection of vulnerable sectors? 150 words (GS-2, International Relations)
Context
- The interim U.S.–India trade deal marks a key step in strengthening bilateral economic ties.
- It aims to reduce recent trade tensions and revive broader trade negotiations.
- However, concerns remain over tariff concessions, agricultural safeguards, NTBs, and policy autonomy.
Background
India and the United States initiated negotiations for a bilateral trade agreement after a period of strained trade relations. The tensions were triggered by higher U.S. tariffs on Indian exports and additional duties linked to geopolitical considerations.
The interim agreement aims to reduce certain tariffs and address “long-standing concerns” in bilateral trade.
Key features include:
- U.S. reduction of tariffs on select Indian exports.
- India’s commitment to reduce tariffs and non-tariff barriers on various U.S. industrial and agricultural products.
- Indications of increased Indian purchases of U.S. goods such as energy and aircraft.
The arrangement is positioned as a confidence-building step toward a more comprehensive trade deal.
Significance of the Interim Trade Deal
1. Strengthening Bilateral Economic Architecture: The deal reinforces the economic pillar of the India–U.S. strategic partnership, complementing cooperation in defence, technology, semiconductors, and critical supply chains.
2. Supply Chain Diversification: Amid global supply chain realignments, closer India–U.S. trade ties may enhance resilience and reduce overdependence on single geographies.
3. Boost to Export-Led Growth: Improved access to the U.S.—India’s largest export destination—can support India’s ambition of expanding manufacturing under initiatives like Make in India.
4. Geopolitical Signalling: The agreement signals India’s continued engagement with major global economies while navigating a complex geopolitical environment.
5. Precursor to a Comprehensive FTA: As an interim arrangement, it may serve as a testing ground for deeper trade liberalisation in the future.
Potential Gains for India
1. Improved Market Access: Lower U.S. tariffs could benefit Indian labour-intensive sectors such as textiles and apparel. Enhanced access to the U.S. market may boost exports and employment.
2. Trade Stabilisation: The agreement may reduce uncertainty in bilateral trade relations, providing predictability for exporters and investors.
3. Strategic Economic Alignment: Closer economic engagement strengthens the broader India–U.S. strategic partnership, which includes cooperation in defence, technology, and supply chains.
Key Areas of Ambiguity
1. Agricultural Safeguards: Agriculture remains a sensitive sector for India due to:
- The dominance of small and marginal farmers.
- Concerns related to price stability and livelihood security.
- The interim deal does not clearly confirm tariff protection for sensitive crops like cereals. Earlier FTAs safeguarded these sectors.
- Lack of clarity increases uncertainty about exposure to U.S. agricultural competition.
2. Non-Tariff Barriers (NTBs) and GM Imports
- The U.S. has consistently objected to India’s restrictions on genetically modified (GM) food imports, considering them trade barriers.
- The agreement refers to resolving “long-standing concerns,” but it remains unclear whether India’s regulatory framework on GM products will be modified.
3. Tariff Asymmetry
- India appears to be reducing tariffs and NTBs across a broader range of products.
- The U.S. retains the ability to impose or reimpose tariffs under certain conditions.
- Since U.S. tariffs were already low, India’s larger tariff cuts may create an imbalance, raising concerns about fairness and proportionality in the trade agreement.
4. Conditional Trade Pressures
- Reports suggest the possibility of renewed U.S. tariffs linked to India’s external trade decisions, such as energy imports from specific countries.
- If trade measures are used to influence domestic economic choices, it may affect policy autonomy.
5. Impact on Farmers and Vulnerable Groups: India’s agricultural sector employs nearly half of the workforce. Increased exposure to highly mechanised and subsidised U.S. agriculture could:
- Depress domestic prices
- Affect income stability
- Increase rural distress
6. Institutional and Legal Dimensions: Some U.S. tariff measures have faced legal scrutiny domestically. Negotiating concessions in response to potentially contestable measures introduces uncertainty.
- Legal due diligence in trade negotiations
- Transparency in commitments
- Parliamentary oversight
Way Forward
1. Clear Safeguards for Sensitive Sectors: India should ensure explicit protection for sensitive agricultural products through tariff rate quotas, safeguard clauses, and phased liberalisation mechanisms.
2. Strengthening Domestic Competitiveness: Rather than relying solely on tariff protection, India must enhance agricultural productivity, invest in value chains, improve storage and logistics, and support small farmers through technology and institutional reforms.
3. Transparent Negotiations: Greater transparency in trade commitments and structured parliamentary scrutiny can enhance accountability and public trust.
4. Preserve Regulatory Autonomy: India must maintain its right to regulate in areas of food safety, environmental protection, and public health, consistent with WTO norms.
5. Diversification of Trade Partnerships: Reducing overdependence on any single market by diversifying trade relations with the EU, ASEAN, Africa, and other regions will strengthen bargaining power.
6. Strategic Calibration: Trade policy should align with long-term developmental goals, including Make in India, Atmanirbhar Bharat, and sustainable agriculture.
Conclusion
The interim U.S.–India trade deal improves market access and stabilises ties but leaves concerns over agricultural safeguards, regulatory autonomy, and balanced concessions. India must ensure transparent negotiations and protect vulnerable sectors while aligning trade commitments with long-term developmental and strategic interests.
