India has to reduce its import tariffs to have a closer economic relationship with the US, US Trade Representative (USTR) Robert Lighthizer has said.

“The US can’t have a relationship where one country has tariffs five or six times higher than theirs... It is a political decision and a business decision. I am not saying that there should be no tariffs on anything. We have our own politics and security issues. But that is a single (largest) issue you have. You have very high tariffs. In fact, more than other developing countries,” Lighthizer said at a ‘Fireside Chat’ at the CII Partnership Summit on Wednesday.

The USTR said that he and Commerce & Industry Minister Piyush Goyal had talked about a small Generalised System of Preferences (GSP) deal (an agreement that allows exporters of certain products from a country duty-free/lower duty market access to the US) but both preferred to work on a bigger free trade-like pact.

“We both felt that what was ultimately needed was a large free trade-like agreement between India and the US that will cement things in a way that other things won’t. And that will be good for economics as well as security of the two countries. That will help us write the rules of trade going forward. I think that we have already made headway,” he said.

The US is India’s top trading partner, accounting for $88.9 billion in 2019-20.

‘Very very high rates’

Talking about barriers to trade, Lighthizer said: “We in the US have all our tariffs bound. And it is about 3 per cent or so... By contrast, India has 75 per cent of its tariffs bound and the bound rate is at about 50 per cent. So these are very very high rates for a $2.8 trillion economy.”

While acknowledging that India’s effective tariffs were substantially lower, he said they were still about five times higher than the US’. “So tariffs are a problem. We don’t think India is interested in reducing tariffs on an MFN basis (same reduction for all trading partners), but if we did have a deal, then we could reduce tariffs in ways that would be helpful I think to both of us,” he said.

Under the Trump regime, India and the US have been working on a FTA, but high demands from the US and India’s refusal to give concessions in sensitive areas such as agriculture and medical equipment did not allow a pact to be concluded.

The USTR said that while bilateral trade between India and the US had grown phenomenally in the last five-six years, the trade deficit suffered by the US had not changed and was at around $29 billion-$30 billion annually.

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