India-U.S. trade deal: Deadlock over agri continues, but Trump surprise not ruled out

With the August 1 deadline approaching, agriculture continues to loom large as an impediment to a trade deal between India and the U.S. India continues to hold firm against opening up the sector to imports to protect Indian farmers, and the U.S. remains keen that the sector be opened up as such a deal would set the precedent for future deals it strikes with the EU and Japan.

Officials, however, are not ruling out a last-minute surprise from U.S. President Donald Trump, similar to what happened with Indonesia and Vietnam.

“The Indian team is back from the U.S. and has left them with what India has to offer,” an official aware of the negotiations told The Hindu. “Now, whether they accept the terms or not is up to them. Agriculture remains a major issue where there is lack of agreement.”

India has been resisting the opening up of the agriculture sector to imports to protect domestic farmers. According to the official, however, opening up the Indian market to U.S. agricultural imports is not just about market access.

“India is one of the few countries that is pushing very hard for a deal,” the official said. “So, it is likely a deal with India will be concluded before the U.S. concludes a deal with the EU or Japan. If agriculture is excluded from the India deal, then that could set the precedent for the EU and Japan deals, and the U.S. doesn’t want to risk that.”

However, according to another source, the bulk of India’s negotiation points are now aimed at a broader Bilateral Trade Agreement (BTA) by September or October this year, rather than a ‘mini deal’ before August 1. Yet, the government is prepared for a surprise deal announced by U.S. President Donald Trump.

“See what happened with Indonesia and Vietnam; the U.S. President announced details of the deal that both Indonesian and Vietnamese negotiators said were not part of what they agreed to,” the second source said. “This was done after a phone conversation between Mr. Trump and the heads of Indonesia and Vietnam, respectively. The same can always pop up with India; we have not ruled it out.”

Both sources confirmed that, while agriculture and dairy remain hurdles from the Indian side, a key hurdle from the U.S. side is their reluctance to reduce import duties on automotive components to zero.