India should offer US limited zero-to-zero tariff deal: GTRI amid Trump's pause

New Delhi: India should reconsider negotiating a comprehensive free trade agreement (FTA) with the US as it could pose challenges to domestic sectors like agriculture, automobiles and pharmaceuticals, think tank GTRI said on Thursday.

It cautioned that under trade pact with the US, many of Washington's demands such as weakening India's minimum price support system for farmers, allowing genetically modified food imports, lowering agricultural tariffs, changing patent laws to extend drug monopolies, and letting American e-commerce giants sell directly to consumers pose major risks.

The risks include harm to farmer incomes, food security, biodiversity, public health, and the survival of small retailers, the Global Trade Research Initiative (GTRI) said.

"Reducing tariffs on farm goods could affect the livelihoods of hundreds of millions, while slashing duties on cars could undercut a sector that accounts for nearly a third of India's manufacturing output. The collapse of Australia's car industry after deep tariff cuts in the 1990s offers a cautionary example," it added.

The remarks came in the backdrop of the USA's decision to defer imposition of additional 26 per cent import duty on India for 90 days. The 10 per cent baseline tariffs are there from April 5 on domestic goods entering the American market.

"Avoid a comprehensive FTA with the US as it would force India to make damaging concessions. It's a deal that would cost India more than it gains.

Restrict to zero-for-zero deal on 90 per cent industrial goods. Europe has offered a similar deal to the US," GTRI Founder Ajay Srivastava said.

He suggested building product value chains with China in sectors like chemicals, machinery, and electronics.

"By using each other's raw materials and intermediates, both countries (India and China) could add more local value to final goods... for domestic use and export. This kind of cooperation could offer near-term benefits and deserves attention at both government and industry levels," Srivastava said.

He added that India could propose a limited "zero-to-zero" tariff deal with the US on 90 per cent of industrial goods excluding sensitive items like cars.

"If accepted by the US, this could evolve into a WTO (World Trade Organization)-compliant goods-only agreement. Stop offering unilateral concessions to the US," he said, adding India should prioritise free trade negotiations with the European Union, United Kingdom, and Canada, and consider broader partnerships with countries like China and Russia.

The government should also tackle domestic reforms such as simplifying tariffs, hassle-free and just implementation of quality control orders, improving GST processes, and streamlining trade procedures.

"These changes are critical if India wants to make the most of global shifts, though progress may be slow," he said.