India and U.S have released framework for an interim trade agreement. The framework will lower tariffs and aims to reshape the energy ties and deepen economic integration between both countries. Tariffs were lowered by President Donald Trump on Indian imports to 18% which were imposed previously due to New Delhi’s purchase of Russian Oil. The agreement has been presented as a symbol of strengthening Strategic partnership between New Delhi and Washington. Both countries are portraying this trade agreement as a crucial breakthrough in bilateral economic relations. However, the interim deal contain flaws as the asymmetry in economic measures and implications for Indian autonomy in long term is in serious contention.
The agreement exhibits an asymmetric bargaining environment. India has been pressurized to remove barriers and reduce tariffs to zero on American goods. United States will continue to impose 18% tariffs on Indian products as their leadership has pointed out that the framework will be beneficial to Rural America and American farmers. While the Indian farmers will have to compete with cheap American farm products. Thus, this agreement can’t be considered as free trade rather it can be termed as economic coercion.
While evaluating the terms it can be said that this trade agreement didn’t come under fair negotiations. The pressure tactics implied in India by America and yielding under such pressure can’t be said as diplomacy rather it is surrender.
Karnataka’s Chief Minister Siddaramaiah pointed out the fact and said that Prime Minister Modi should take responsibility for compromising on Indian interests. He further said that the Prime Minister has exposed the nation to immense pressure and the diplomacy and national security is hampered badly. This is a sign of complete surrender. Moreover, if we consider the fact that regardless of its growth India still remains a developing economy. It possesses structural weakness in agriculture, technology and manufacturing. Thus, the tariff compromises in the trade agreement don’t produce symmetric results in this type of situation.
Immediate economic concerns are there for Indian domestic industry with respect to the trade agreement. The already struggling Indian agricultural and manufacturing sector with limited technological depth is in competition with U.S firms that possess superior state support and capital. The tariff reduction is displacing the domestic producers rather than being beneficial. India’s Current MP of Sirsa, Selja highlighted that based on the current information the agreement could ultimately place Indian farmers and domestic industries under high stress. She highlighted that these concessions not only embark extensive effect on footwear, textiles, leather and chemicals but are also a potential threat to agricultural economy as well. The Indian government’s flagship Atmanirbhar Bharat (Self-Reliant India) is also under question. The procurement of American products doesn’t align with the self-reliant policy. Moreover, the disconnection between market opening and guarantee of capacity building or technology transfer hinders the long-term developmental goals.
The opposition are demanding for full details of agreement to be presented in the parliament. Moreover, the govt. is being pushed to make assurance that interest of small-scale industries will not be compromised for diplomatic gains. The interim trade agreement can hamper the Indian strategy autonomy in long terms. Historically, India has prioritized strategic autonomy by balancing relations with competing great powers. U.S negotiators pointed that there is ambiguity relating India’s commitment on Russian oil imports. However, it is kept absent from the joint statement, but it highlights about divergence in narratives that could signal future friction. For India, the trade agreement carries certain costs that are far beyond tariffs reduction. Analysis suggest that the trade deal may cause reduction in India’s GDP emphasizing the fact that it represents unfair arrangement.
The U.S relief on tariffs remain reversible and conditional. India is committed to reducing tariffs for a wide range of American goods. The fact is that U.S has secured its right to re-impose its restrictions while India providing greater market access may find it difficult to reverse the action. Further, equitable market access is not guaranteed by tariff relief alone. India may get benefit on one front from the deal but leaving the structural barriers intact. Moreover, the trade agreement is a broader aspect of U.S Indo- pacific strategy while competing with China. U.S has been using economic incentives as strategic tool. Ultimately, it binds the partners into geo-economic circuit, thus leaving less space for them to manoeuvre. Risk for New Delhi is there as the trade deal can transform into extended form of strategic dependency.
It can be noted that interests of India lie in attaining global visibility. India has been focusing on securing trade and accommodation with Washington and ultimately neglecting regional economic integration. South Asia being one of the least integrated regions has poor connectivity and minimal intra-regional trade. India gives more importance to extra regional partnerships rather than strengthening regional collaboration. India’s engagement with U.S will be problematic in future as it represents an unbalanced equation. A sustainable trade agreement should guarantee protection to vulnerable sectors. Concessions made should be conditional and there should be commitments regarding investment in domestic manufacturing. The interim trade agreement having lack of these assurances contains great risk. Short term diplomatic gains may be achieved but for long term there is fear of strategic reduction. An era where geopolitical competition is at its peak, policies implemented should lead to strengthening of national resilience rather than weaken it. Challenges are there for India as it has to focus on its growth while protecting its economic sovereignty. If the trade agreement fails to accomplish it, then it will go down in history as a strategic backfall covered by diplomatic trust.
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