India, US Start Trade Talks; Tariff Parity Unlikely, Focus On Rationalising Rates

India and the U.S. are set to begin virtual negotiations this week, with discussions around a broad package deal on tariffs and non-tariff barriers taking precedence over achieving tariff parity, according to people in the know.

"India and the U.S. may not go for item-by-item parity during these sector-specific talks, and the talks may revolve around shaping the deal on bringing the overall tariff down from both sides," they said.

The two sides are set to hold sector-specific talks in the coming weeks under the agreement. The first phase of the bilateral trade agreement between India and the U.S. can be out within the tariff-pause period of 90 days. The terms of reference for the pact have been finalised and further talks are set to take place primarily over video conferencing, though there is a possibility of Indian negotiators visiting the U.S. and vice versa.

The deal is also unlikely to have a zero-for-zero tariff strategy since such a plan is usually more mutually beneficial for more developed economies. Economies like European Union and the U.S. can offer it to each other, but it would not pan out well between India and the U.S., they said.

Zero-for-zero tariff is an approach where two countries can identify specific product categories and eliminate the levies on them, instead of imposing a blanket range of tariffs or inking a broader trade deal.

Indian trade think-tank GTRI had earlier stated that India should pitch for a zero-for-zero approach, with around 90% of industrial goods currently traded between India and the U.S. getting covered under such an arrangement.

Also, the bilateral trade agreement will be a package deal that could include issues such as goods and non-tariff barriers such as professional visas, digital trade, e-commerce and intellectual property rights.

India and the U.S. have been engaged in negotiating a bilateral trade agreement since March. Both sides have targeted a conclusion of the first phase of the pact by fall (September-October) of this year with an aim to more than double the bilateral trade to $500 billion by 2030.