“There is nothing that cannot be resolved if the two sides are determined,” Dua said. “India should make it very clear to the United States that the lifting of the 25% penalty should be imperative.” He added that once this is addressed, both sides could resolve disputes step by step while staying within the 25% tariff limit.
Arpita Mukherjee, professor at Indian Council For Research On International Economic Relations (ICRIER), noted that business communities in both countries are eager for an agreement. “One thing is for sure: there is movement in the right direction,” she said. She pointed out that India seeks a fair deal, possibly zero-for-zero tariffs or zero-for-15%, and that the talks come at a time when GST cuts are already boosting domestic demand.
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She also highlighted that political considerations, such as elections and inflation pressures in the US, may push Washington toward lowering tariffs. “This trade agreement will be a step in the right direction,” Mukherjee said.
These are edited excerpts of the interview.
Q: How would you see this? This is certainly de-escalation, with both sides climbing down a little bit from the escalatory ladder, step by step. How would you read it?
Dua: Very positively. We should forget what US President Donald Trump was trying to achieve in his endeavours to bring about peace between Ukraine and Russia, of which we had become collateral damage, particularly because we didn’t have the leverage that China and the European Union had vis-à-vis President Trump. So, to that extent, he realises even now that there is no point in going after India and putting penalties on India for trading with Russia, at a time when China, the European Union, and the US itself were beneficiaries of India’s crude oil imports from Russia. So, I am delighted to see this. Let’s forget what he did and tried, and let’s look forward. The US is an important trading partner for us and an important strategic partner, and I look at the relationship in that context.
Q: Your first thoughts. We, the stock market types, are prone to jumping to conclusions. Is a deal soon around the corner? How fast can it be? Are those the right questions to ask? And is there any way to know at this point? There are various timelines. Yesterday, we had somebody who said, when asked before all this happened, When do we see some sort of a deal? And the gentleman said, certainly before March, before we here in India get into the election season. So, we’d certainly like to conclude it. This seems, of course, much closer now. What would you say?
Mukherjee: One thing is for sure: there is movement in the right direction. When you look at businesses on both sides, they want a deal. Of course, India wants a fair deal, whether we will be getting a zero-for-zero arrangement or we settle for a zero-for-15% tariff. You also have to see that the deal may come at a time when the GST has been reduced for many items, which means there is a domestic demand boost. At the same time, there is a trade negotiation. Now, this entire negotiation is very strategic. Nobody is looking at the pure economic interest. For example, Trump is also not looking at the economic interest and the repercussions, because he is just focusing on tariffs and linking tariffs to multiple other things.
With the US moving into a festive season, and India and Brazil moving into a festive season, and with inflation rising in the US, he will gradually turn around and bring down the tariffs. Therefore, this trade agreement will be a step in the right direction.
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Coming to the core context of the trade agreement: relaunching the trade agreement and signing the trade agreement are two totally different ball games altogether, because we also have our domestic sensitivities. But the 50% tariff has diluted our domestic sensitivities to a great extent, and maybe industry will be more accepting of an FTA.
India is also looking at the European Union. Even after the FTA, the European Union put a hefty tax on Google. So, it also gives India ideas for negotiating on different aspects.
Q: Until now, tariffs were not part of a trade negotiation, which can still happen. They had become part of political brinkmanship. But now, at least, if we go back to trade, how do you think the logjam can be broken? Because in most of the deals that the US has done with the rest of the world, the US hasn’t given an inch. It’s been almost 100%. But here, we go back to the sticky points: agriculture, dairy, and GM crops. Do you think most of this can be resolved?
Dua: I think so. There is nothing that cannot be resolved if the two sides are determined to agree. I’m a firm believer in that, and perhaps I have an optimistic view, but I’d like to see the intention of the US to arrive at an arrangement with India by starting with lifting the 25% penalty for trading with Russia in crude oil.
India should make it very clear to the United States that while we are talking about the bilateral trade agreement, and we do know that there is a 25% export duty on Indian products to the US, that is the minimum we expect the United States to lift. The lifting of the 25% penalty should be imperative, and then we can sit down to resolve one dispute after another, addressing the US red lines one by one. Everything we do must remain within that 25% outer limit.
Q: In the last few weeks, we’ve also seen overtures with China. The SCO Summit. Now, how do you think India would ensure a delicate balancing act? Because there’s been a lot of talk about boosting trade ties with China, and now we have to go back to negotiations with the US. Do you think this is going to be easier said than done?
Dua: Not really. To China’s credit, at the SCO and in bilaterals with Prime Minister Modi, they have talked of a multipolar world. They’re not talking of there being only one centre of power in the world, which is the US, or a bipolar centre where China comes in. They’ve talked of the world consisting of several poles, of which India could be one, Russia another, Brazil another, or whatever we say.
The question is, we want to increase our trade with China, undoubtedly, but we also do not want our trade with the US to suffer. After all, the US is our biggest trading partner today, with over $130 billion of trade, of which $86 billion was exports. China is the other way around – we import from China far more than we export, and we have a $100 billion deficit with China. So, the question is, we are dealing with two different things. It does not conflict. The US itself also wants to have a trading partnership with China. So why should anyone object to our trade with China and our trade with the US building up simultaneously?
Watch the interview in the accompanying video
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