US-UK trade deal may have pointers for India

NEW DELHI: Will the US go to 10% and no further? Amid negotiations for a bilateral trade deal with India, the US-UK agreement announced on Thursday pointed to the possibility of the Donald Trump administration sticking to the baseline tariff for several items and not moving to zero duty covering "substantial trade", as is the case under most trade agreements.

While industry long suspected that zero tariffs under Trump might remain a mirage, govt officials also left it vague, refusing to comment on the indications they received during the three or four rounds of discussions they had since March.

For instance, under the deal with the US, tariffs on British cars were reduced from 27.5% to 10%, although in the case of steel, the duties were removed. "The UK is committing to increase market access for various US exports and buy more US aircraft and other products. The US will still impose a 10% tariff on most UK goods," UBS said in a note, adding that India and South Korea are among countries with which detailed talks have taken place.

Besides, the deal is tilted in favour of the US, which lowered duties on less than 100 items, while the UK slashed levies on more than 2,500 items, said Ajay Srivastava of GTRI, a trade research body.

The deal also indicates that the US is willing to settle for tariff quotas, which means lower tariffs on a specified quantity of goods, to reduce levy. So, say, 10,000 American-made automobiles may be allowed at lower duty in India. Besides, UK orders for Boeings signal that the trade deal with India too may have non-tariff top-ups.

"If the UK-US deal sets the template, India can expect growing US pressure to finalise a 'mini-deal' focused on tariff cuts and key strategic commitments rather than a full FTA that may come much later. India may be asked to reduce tariffs on a basket of sensitive agricultural products, including soybeans, ethanol, apples, almonds, walnuts, raisins, avocados, spirits, many GMO products, and meat and poultry. Tariff concessions on automobiles are also expected, especially as India has already agreed to reduce duties on select UK vehicles from 100% to 10% under its recent agreement with the UK," said Srivastava.

This could result in India agreeing to import more LNG from the US while stepping up defence and aircraft orders.

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