India, U.S. Eye Middle Ground on Trade Ahead of Modi-Trump Meet
Narendra Modi, India’s prime minister, speaks as U.S. President Donald Trump, right, listens during a meeting at the Oval Office of the White House in Washington, D.C., U.S. (Photographer: Win McNamee/Pool via Bloomberg)

India, U.S. Eye Middle Ground on Trade Ahead of Modi-Trump Meet

(Bloomberg) -- India and the U.S. are working toward easing trade tensions, including a possible withdrawal of some disputes from the World Trade Organization, ahead of a meeting between leaders of the two economies, according to people familiar with the matter.

Giving market access to U.S. dairy products, premium pricing power for some innovative American medical devices and tax concessions on information technology are also among the so-called goodwill measures being considered by India, the people said. In return, the U.S. may possibly restore India’s preferential trade treatment terminated earlier this year, they said, asking not to be identified as the discussions are private.

Easing of trade tensions will help India boost exports and cushion an economic slowdown caused by a collapse in domestic consumption. India was the largest beneficiary of the generalized system of preferences or GSP -- under which developed countries encourage developing economies to industrialize -- before the concession was ended.

The trade department in New Delhi has been holding daily meetings over the last few days to work out a doable package in time to be taken up by Prime Minister Narendra Modi when he embarks on a week-long trip to the U.S. Sept. 21, the people said. During the trip he will attend the ‘Howdy Modi!’ event in Texas with President Donald Trump. The details of any deal are yet to be finalized, the people said.

A spokeswoman for India’s trade ministry couldn’t be immediately reached for comment.

Tensions have been simmering for some time between the two nations with bilateral trade of close to $90 billion. Trump has accused India of charging higher duty on American imports, particularly tariffs as high as 100% on Harley-Davidson Inc. motorcycles -- an issue he had flagged in a joint address to Congress in February 2017. The U.S. is also challenging India’s retaliatory tariffs at the WTO. India imposed higher tariffs on almost 30 American products in response to Trump’s decision to end trade concessions.

Following his accusations of India running a high trade surplus with the U.S., New Delhi has been buying more oil, natural gas and coal, drones and aircraft from America, resulting in reducing the trade surplus in 2017 and 2018, according to India’s trade ministry.

Here are key contentious issues between the two sides:


India, one of the largest dairy markets in the world, does not allow import of U.S. milk and dairy products on religious and cultural grounds. India has objections to allowing products of animals that are fed the so-called blood meal or tissues of ruminant origin. India may consider giving conditional access, the people said.

Medical Devices

The U.S. wants India to remove price caps on medical devices, especially on coronary stents and knee implants. While that may be unlikely, India may agree to give premium pricing power to innovative American pharmaceutical devices.

Communication Products

India is willing to offer duty concessions on specific items, for which the department of electronics and information technology has initiated talks.

Steel, Aluminum

Trump exempted nations including Brazil and South Korea from higher tariffs last year in exchange for quantitative restrictions. India has refused to accept such a deal.

Preferential Treatment

Though only $5.6 billion worth of products received duty benefits worth $190 million in the year ended March 18, restoration of the benefits under GSP has been on top of India’s agenda due to its competition with low-cost rivals.

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