Explained | US push for grand trade agreement with India; opening agri sector

It is essential to understand why the US is keen on India's agriculture sector. Here's a list of Q & As (questions and answers) to explain these issues.

New Delhi: The US is pushing India to negotiate a "large" and "grand" bilateral trade agreement while seeking opening the agriculture sector for American businesses, saying "it just can not stay closed".

This will be an important agreement which India will negotiate with a developed economy. Talks are on with two other developed markets - the UK and the European Union (EU).

It is essential to understand why the US is keen on India's agriculture sector. A list of Q & As (questions and answers) to explain these issues:

What is a "large" and "grand" bilateral trade agreement?

Normally, in a trade pact, two trading partners either eliminate or significantly reduce customs duties on maximum number of goods traded between them. However, the US seeks to negotiate a comprehensive trade agreement covering all key aspects, rather than engaging in sector-specific discussions.

Beyond tariff reductions, the US may like to include provisions on government procurement, agricultural subsidies, patent law relaxation, and unrestricted data flows'” issues that India has largely opposed.

Why does the US want India to open its agriculture sector?

Agriculture in India is not just an economic activity but a way of life, supporting over 700 million people. India is largely self-sufficient in food production, whereas for the US, agriculture is a major trade industry.

As per a report, in 2024, US agricultural exports stood at $176 billion, accounting for about 10 per cent of its total merchandise exports. With large-scale mechanized farming and heavy government subsidies, the US and other developed countries view India as a lucrative market to expand their exports. Unlike India, where farming is linked to livelihoods, the US sees agriculture primarily as a trade and market access issue.

What does opening up a sector to a foreign country mean?

India's agriculture sector is currently protected by moderate to high tariffs to shield domestic farmers from unfair competition. Opening up a sector means reducing import curbs and duty.

Why is the agriculture sector sensitive to India?

Agriculture and allied activities such as animal husbandry form the backbone of India's rural economy, providing employment to over 700 million people. Unlike in developed economies where agriculture is highly mechanized and corporatized, in India, it is a livelihood issue, making any move to liberalize the sector highly sensitive.

Why is agriculture a politically sensitive issue for the Indian government?

According to GTRI Founder Ajay Srivastava, opening up agriculture to heavily subsidized foreign imports would mean an influx of cheap food products, severely impacting Indian farmers' incomes and livelihoods.

"Over 90 per cent of global food trade is controlled by five multinational corporations that have historically used predatory pricing strategies. If India reduces protection, domestic farmers could be at the mercy of these global giants, leading to severe political and economic consequences. This makes agriculture a contentious issue for Indian government," he said.

What kind of duties does India impose on agricultural imports?

India maintains a tariff structure ranging from zero to 150 per cent to protect its agricultural sector. The US also imposes higher tariffs on select agricultural goods - for instance, tobacco (350 per cent).

Additionally, the US applies complex non-ad valorem (NAV) tariffs that make imports more expensive, a fact often overlooked in trade discussions, according to the GTRI.

What agricultural products does the US want to export to India?

The US agri exports to India was $1.6 billion in 2024. Key exports include - Almonds (in shell - $868 million); Pistachios ($121 million), Apples ($21 million), Ethanol (ethyl alcohol - $266 million).

Srivastava said the US provides massive subsidies to its farm sector and in fact in some years, the subsidy level exceeded 50 per cent of production value for certain products, such as: Rice (82 per cent), Canola (61 per cent), Sugar (66 per cent), Cotton (74 per cent), Mohair (141 per cent), Wool (215 per cent).

The US may want to push many of such exports. Dairy is another key sector of American interest. "If India opens its dairy sector, it could lead to an influx of heavily subsidized imports, threatening the livelihoods of millions of small-scale Indian dairy farmers," he added.

Are all agricultural products sensitive?

Given that over 50 per cent of India's population relies on agriculture for its livelihood, India treats the entire sector as sensitive, Srivastava said and added that tariffs are particularly important for staple crops, dairy, and key farm products that sustain rural livelihoods.

What does the WTO say about sensitive sectors?

India's agricultural tariffs do not violate WTO commitments. The rules allow member countries to protect sensitive sectors, particularly those linked to food security and rural employment, which are crucial for India.

How much does India export in agriculture?

In FY 2024, India's total agricultural exports stood at $45.7 billion, with a portion of this going to the US ($5 billion).

Are tariffs the only barriers to agricultural trade, or there non-tariff barriers as well?

Tariffs are only part of the trade equation. Non-tariff barriers (NTBs) also play a significant role in restricting market access.

Srivastava said that the US has complex sanitary and phytosanitary (SPS) regulations that often act as disguised trade barriers. For instance, the Maximum Residue Limits (MRLs) imposed by the US on pesticides and chemicals in agricultural products are among the most stringent in the world, making compliance difficult for developing countries, including India.