New Delhi, Dec. 13: Differences over farm sops are coming in the way of a possible India-US trade deal.
While the US is pushing for a lower tariff on its grain and other food imports, India is demanding up to a 70 per cent cut in American farm subsidies.
Local policy-makers feel opening the doors to US exports will be suicidal as the US pays an average subsidy of $16 billion a year to its farmers, which gets reflected in the prices at which the products are sold in the world markets.
The commerce ministry has been pressing for at least a 70 per cent cut in subsidies at bilateral and multilateral negotiations as this will place the Indian farmers on a more equal footing.
However, the US, which is keen that any free trade agreement with India covers farm produce, is unwilling to go in for any deep cuts; instead it wants a reduction in Indian farm tariffs.
The battle between farm duties and farm subsidies is likely to stall any real progress on a deal on the free trade agreement, scaling down the expectations generated by the recent visit of Prime Minister Manmohan Singh to the US.
Tariff tiff
India’s average real farm tariff stands at about 34 per cent, down from 113 per cent in 1991.
Though the rate has fallen, India has been allowed by the World Trade Organisation to raise it to as much as 114 per cent, if the situation warrants.
According to the US trade department, Delhi raises the rates whenever there is an import deluge. A report of the US Senate said America’s farmers and food makers were losing millions of dollars each year in lost sales because of India’s tariffs and non-tariff measures which raise the cost or prohibit farm exports.
The report notes that agriculture exports to India are minimal, with the country receiving less than 0.5 per cent of farm exports in 2008.
Indian officials said Washington was just lobbying to remove many farm items from the negative list, a roster of products that will be out of the free trade deal and, hence, will not be subject to duty cuts.
Besides, it wants India to lower the maximum permissible duty rates on different farm products.
Trade with the US was at $43 billion in 2008, with a positive balance of $8 billion in favour of India. Washington wants to export more goods to correct the balance.
The story is the same for America’s commercial relations with most Bric (Brazil, Russia, India, China) nations, leading to its negotiators adopting a tough bargaining position at various bilateral and multilateral forums.
Caught up in this hard bargaining is India’s attempt to get a better deal for its software firms, which are feeling threatened by the Obama administration’s promise of protecting jobs.
India may also have to agree to a sharp reduction in tariff for high-value textiles, spirits and other consumer goods besides opening up sectors such as banking in return for easier terms for its manufacturing and service companies.
The two sides have also differed on medicines, with the US demanding an easier drug regime that will allow its companies to make drugs for India’s public health programmes.
Source : Telegraphindia.com