Alternatively, there was enough basis for trade between the countries —India and US—which was being held back for political or geo-economic reasons. If anything, India’s steadfast refusal to back down before Trumping threats of tariffs and exclusion, may have had something to do with it. The two countries have been trading diverse products from pharmaceuticals, to steel, to aircraft, technology products and some farm articles. Trade volumes were around $130 billion a year —which was neither insignificant nor humongous.

It seems the suddenly announced trade deal between USA and India belonged to the first category and the sudden drop in trading between India and USA since middle of last year was because of the second class of factors, namely, trade thwarted by Trump tantrums. Donald Trump might have realised the foolishness of his move to punish India for Russian oil purchases after seeing India and the EU quickly wrap up a long-in-the-works negotiations for a bilateral trading framework.

After all, America was punishing India for another people’s war (in Europe), whereas those really hurt and facing war threats (the Europeans) could jolly well agree to a free trade deal with India. Seeing what he had landed himself with, Trump then conjured up a trick — pulled out the rabbit of a mega trade deal out of his hat unilaterally, accompanied by a unilateral removal of punitive tariff of 25% for Indian purchases of Russian oil.

Prime Minister Modi was not left with any alternatives — he could not but have welcomed the trade deal announcement, adding how pleasant it was to work with Donald Trump for the final week being of the world. It all is a ludicrous spectacle of an absurd drama. Both sides of the so-called trade agreement have remained vague.

A trade agreement is a serious matter and has widespread implications for the countries entering the agreement. These are not as if they say we are scraping all tariffs and goods will move free of any encumbrances. Trade agreements have detailed schedules on duty structures, categories goods for tariff purposes and above all the domestic components requirements for purposes of tariff treatment. These cannot be worked out immediately after phone calls and are generally worked out by professionals.

Following the sudden announcement of Indo-US trade deal by Donald Trump, there is hardly any elucidation of any of these issues. There is hardly any indication of the promised tapering of Indian purchases of Russian oil, as Trump has claimed. Has claimed, that India should start buying Venezuelan crude oils, which are similar in nature to Russian crude and therefore could be easily adopted by Indian refineries.

Even if, Indian refineries are equipped to accept Venezuelan crude tin place of Russian, the entire production of the Venezuelan oil industry is no match for Indian requirements. The entire production of the Venezuelan oil industry is far lower than the Indian purchases of Russian crude, according to reports on the comparative size of the oil industry.

India has also committed to bring down all tariffs on American goods to zero, which is also a claim by Trump. If India has given any such blanket promise, it will be highly irregular. No country could afford to allow zero duty entry of goods and products without a similar concession from the other. India cannot allow US goods enter without any duty, while its products attract 18% or whatever duty America chooses to impose.

This is like conceding your economic sovereignty. So then, if there is a trade agreement —free or otherwise— the two sides must agreement of a schedule of agreed tariffs on each other’s products. There have been several rounds of trade discussions between the two sides over the last one year, and the trade professionals must have worked out the detailed schedules.

For the sake of clarity and openness, these should be announced in proper manner and made public. Trump has announced a $500 billion trade turnover between USA and India by 2030. If not 2030, sue a trade target is not unfeasible for the two countries, given the size of these economies and their overall GDP. If India buys a few aircraft from Boeing Company for its domestic civil aviation fleet, the import figure from USA would jump.

For India to push up its exports to USA could not be as simple. We are exporting generally low-value items like textile products, leather goods, labour intensive items, pharmaceuticals and similar products which have break-bulk small ticket articles. Pushing up their off-take radically could prove to be difficult over a small time frame.

There are indications that US farm products are included in the trade deal and these cold now penetrate the Indian market. However much, tariffs are removed and entry of US farm products allowed, given the exchange rate between the rupee and the dollar, large scale purchases of US farm products in India are unlikely unless these are heavily subsidised by the USA.

Additionally, our preferences for farm items are also different and India might not be a ready market for most of US farm items either. Consumer preferences do matter in case of any purchases. At any rate, whatever is the truth around the abrupt announcement of Indo-US trade deal, it is good for us if it has any. But let us hope for the best that at least punitive tariff is gone hopefully for good. (IPA Service)