New Delhi: Washington has updated the India-US FTA factsheet. In the new version Washington has removed the mention of “certain pulses” as goods on which India would remove or entirely eliminate tariffs. The other notable change to the factsheet was the changing of wording from “commit” to “intends,” a significant change since it referred to the $500 billion purchase commitment that India had agreed to. The third major change was with regard to “digital taxes.”
In the initial factsheet, the US said India would remove its “digital services taxes.” The updated version now says that “India committed to negotiate a robust set of bilateral digital trade rules.” Much media and public speculation has viewed the US’s change in language as a key victory for India in pushing back against what many saw as worrying concessions to the United States. However, trade experts say such language is common when negotiating a bilateral trade deal.
Ambassador and trade expert Dr. Mohan Kumar pointed out that there were three steps towards a trade deal. “The first step is a joint statement, which is then expected to be followed by an interim agreement, which is expected to be inked in March, and then the ultimate bilateral trade agreement.” Trade experts add that in the time between the joint statement and interim agreement, much of the language is softened—the changing of words from “commits” to “intends” through factsheets is a common practice.
It enables both sides to go back to language actually agreed to in the joint statement. This often makes moving towards an interim agreement much easier. In the joint statement, India has not formally committed to buying $500 billion worth of US energy. The wording states. “India intends to purchase $500 billion of U.S. energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next 5 years.” The words “intends to purchase” is only a statement of intent, not legally binding.
The same is true of the removal of ‘pulses’. Removal of pulses was not part of the list, and neither did India commit to removing digital trade taxes in the joint statement. The question arises is if that is the case, why did the US issue such an aggressive factsheet in the first place? Former Ambassador Talmiz Ahmad believes that there has been a two-pronged strategy here by the US. “The original factsheet was issued by Trump to put pressure on India and to showcase at home that he was able to achieve the maximum concessions he wanted.” He added.
“The revision of language would probably have come after Gor (Ambassador Sergio Gor) had a word with the president stating that such conditions were embarrassing the Indian government. Trump, having achieved what he wanted, would have agreed because he wants the deal to go through.”
The softening of the US’s stance has provided respite to a government that has come under pressure on the trade deal. Indian farmers have announced a “Bharat Bandh” on February 12, central trade unions have called for general strikes, and there are worries amongst India’s strategic community on the implications of what such a deal could have for India’s strategic autonomy. However, as former ambassadors point out, the respite is but a brief one, as March is not far away, and though the language has been modified, none of these issues have gone away. Ambassador Kumar points out that India must move forward on the trade deal, as not doing so means the levy of 50% tariffs remains, which means a loss of around 2.2 million jobs.
