LDN - Business

Exclusive: U.S. pushing India to buy $5-6 billion more farm goods to seal trade deal - sources

[January 24, 2020] By Aditya Kalra and Neha Dasgupta

NEW DELHI (Reuters) - The United States wants India to buy at least another $5-6 billion worth of American farm goods if New Delhi wants to win reinstatement of a key U.S. trade concession and seal a wider pact, four sources familiar with the talks told Reuters.

U.S. President Donald Trump cited trade barriers last year when removing India from its Generalized System of Preferences (GSP) program that allowed zero tariffs on $5.6 billion of exports to the United States. In retaliation, India slapped higher tariffs on more than two dozens U.S. products.

Ahead of a Trump visit to New Delhi to meet Prime Minister Narendra Modi next month, negotiators on both sides are hammering out terms for a trade deal that would include New Delhi rolling back higher tariffs on some farm goods such as almonds, walnuts and apples, one of the sources said.

Both governments had hoped to work out a limited trade deal last year, but struggled to reach an agreement.

India's commerce ministry and the U.S. Embassy in New Delhi did not respond to a request for comment. The office of the U.S. Trade Representative did not immediately respond outside regular business hours.

While India has offered partial relief on medical device price caps that have hurt American pharma giants and a roll-back in tariffs on some U.S. goods, Trump's team wants a sweetener of $5-6 billion in additional trade for U.S. goods to restore GSP privileges, three of the sources said.

That demand was conveyed by the United States to India in late December, said two sources.

As part of the negotiation, the U.S. wants India to increase imports of frozen poultry products, the first source said. The U.S. has already been pushing India to cut the high import taxes on poultry products.

"The deal has to be agriculture focused, the U.S. is putting a number on everything (if India wants GSP back)," said one of the sources.

The sources asked not to be named due to the sensitivity of the discussions.

Other than the agriculture sector, the United States could be swayed if some of that additional revenue goes to its energy sector, said one of the sources.

Indian oil minister Dharmendra Pradhan this week said India was looking forward to extending its energy cooperation with the United States and other countries, but didn't disclose any planned deals.

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A man holds the flags of India and the U.S. while people take part in the 35th India Day Parade in New York August 16, 2015. REUTERS/Eduardo Munoz/File Photo

Trump is likely to visit India in late February, in what would be his first visit to the South Asian nation since he took office three years ago.

SMALLER CHINA-TYPE DEAL

India and the United States have built close political and security ties, but in recent years trade frictions have come to the fore. Trump has often named India as one of the countries with the highest tariffs in the world.

Trump's administration has also been upset with India's decision to force foreign card networks to store more data locally and imposition of stringent e-commerce investment rules that impacted operations of Amazon.com Inc <AMZN.O> and Walmart's <WMT.N> Flipkart.

A fifth Washington-based source with knowledge of the U.S. administration's thinking said a U.S.-India trade deal would be far smaller than one the United States struck with China this month, but will "look basically the same".

China this month agreed to increase purchases of U.S. products and services by at least $200 billion over the next two years in exchange for the rolling back of some tariffs, defusing an 18-month row that had hit global growth.

"It will be challenging for the U.S. to see a reasonable agreement with India ... without concessions on the trade gap. Given the recent deal with China, India has to follow suit," said Samir Kapadia of Washington-based lobbying and advisory firm, The Vogel Group.

Trade between United States and India stood at $142.6 billion in 2018, but Trump wants to reduce its $25.2 billion deficit with India.

India has also offered the United States a commitment to increase purchases of almonds and apples and scrap an import tariff of 50% levied on Harley-Davidson <HOG.N> motorcycles, the first source said. Trump has publicly said India's high tariffs on such bikes was unacceptable.

India initially also offered to relax some tariffs on high-end U.S. technology products, but that is now off the table, said one of the sources.

(Reporting by Aditya Kalra and Neha Dasgupta; Additional reporting by Alexandra Ulmer, Nidhi Verma; Editing by Euan Rocha and Toby Chopra)

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