A steep price for the tariff wins

Short-term concessions in the trade deal with the US risk undermining India’s economic interests and strategic autonomy

Whichever way you spin this, it should be clear that India has bowed to the diktats of the United States in return for a trade agreement that eases punitive tariffs on India but also barters away the nation’s long-term interests and compromises the much-vaunted strategic autonomy that has been the centrepiece of the Indian policy framework for a long time. Not every detail of what was called the “interim agreement regarding reciprocal and mutually beneficial trade” between the two nations is known. But what is known, including the circumstances surrounding the deal, the manner of its announcement, the language of the joint statement and the connected White House executive order, indicates that India has shifted some long-held positions, and to that extent, this is not a deal between two equals.

The US high-handedness stretched to simple courtesies like the timing of the release of the agreed statement. Trump announced the broad agreement on his social media platform, Truth Social, on February 2, days ahead of the official release by both nations, on February 6/7. The Indian government’s announcement of the joint statement on PIB is timestamped February 7, 4.29 am IST, an unconventional hour that presented as a US-led announcement working to US time zones. If Nehru told us famously that “when the world sleeps, India will awake to life and freedom”, we may say that the deal marks a literal and metaphorical reversal of that dawn, because as India slept, the US closed a deal that snatches away India’s right to decide its goals, its preferences, and its trade partners.

Yet, the optics, the timings or the self-styled “weave” of the US administration, devoid as Trump and team are of diplomatic niceties, mark only the surface irritants of a deeper loss that India will have to come to terms with over time. A tighter embrace with the US on onerous terms, particularly but not limited to the food and the agri sector, carries the risk of a longer-term ecosystem change that may well be irreversible and forces India on a path that will make many in the country very uncomfortable. The RSS and its groups will also not be comfortable with what has transpired, as can be seen from the statement of the Bharatiya Kisan Sangh, an RSS affiliate, that there should be no route open for genetically modified (GM) related products to enter the country.

The Trumpian style of forced deal-making and the US’s ways of the Wild West may pass with time, but the implications of this trade deal will continue to exact a price on India long after. Compromises for the short-term inevitably bring disaster for the long term.

As farmer groups raise voices of protest against the opening of the agri sector to US imports, the nation has been assured that the interests of farmers, the MSME sector, dairy, handlooms, and handicrafts will remain protected under the new deal, and that no GM crops will enter India as a part of the deal. But consider that the ‘no-GM’ imports claim holds by a thin thread – for example, dried distillers’ grains, or DDGs for animal feed, which feature in the first bullet of the trade agreement as announced, come mostly from GM crops.

DDGs, a by-product of ethanol production from corn, add nutritional value in animal feed, but can it be claimed that the GM “quality” is erased after the heavy processing the corn goes through as ethanol is extracted? There is no consensus that the transgenic nature is eliminated in the processing. DDGs are used in feeding cattle, dairy cows, swine, and some poultry, which opens a route for a GM-linked product to enter the dairy chain. Further, if this is not a red line for India, then how long can India hold out on other points, say dairy, on which the US has been pushing, much like it has on DDGs?

The fine print

Do note that India’s position against milk imports (which is not part of this deal) is seen by the US as a Foreign Trade Barrier. In the Indian view, dairy must only be from animals that are not given blood meals or feeds containing internal organs or tissue of ruminant or porcine, but the US holds that this view lacks a “discernible animal health or human health justification”. The pressure on dairy from the US will not go away but will likely increase over time, now that India has opened a window. In this light, the statement in the trade agreement that “India also agrees to address long-standing non-tariff barriers to the trade in US food and agricultural products” indicates the nature of the trap that India has walked into.

Equally problematic is the statement that within six months India must determine “with a view towards a positive outcome... whether US-developed or international standards, including testing requirements, are acceptable for the purposes of US exports entering the Indian market in identified sectors.” The executive order issued by Trump lowering tariffs on India also puts in place a committee that “shall monitor whether India resumes directly or indirectly importing Russian Federation oil”, with the threat of punitive duties coming back if it is determined that India has not stopped or has resumed buying Russian oil.

None of this should keep India comfortable. The government has, of course, gone on the offensive in defending the deal, but it is unlikely that the nation will accept these terms in toto. It would be appropriate for the government not to oversell the deal, as the commerce minister Piyush Goyal tried in his press conference. Prudence would be to leave room for some backtracking in the light of evolving public opinion.

(The writer is a journalist and faculty member at SPJIMR; Syndicate: The Billion Press)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.