English Hindi



Prelims bits

Prelims Capsule

International Relations

India-USA trade deal

India-USA trade deal

Tag:GS 2|| International Relations|| India & Rest of the World|| USA

Why in news?

  • India and the US failed to reach a limited trade agreement during the visit of the Indian PM to the U.S.

What is the expected “limited” trade deal?

  • Duties imposed by India
    • The trade agreement lagged behind India’s duties on Information and communication technology (ICT) goods.
    • The U.S. wanted to reduce or remove the 20% penalty on mobile phones and Ethernet switches.
  • Greater access to the market: The U.S. has called for greater access to the Indian market for medical devices, such as stents and knee implants, other than dairy and agricultural products.
  • GSP: India, for its part, wanted to restore the Generalized System of Preferences, which provides preferential market access to its goods in the United States.

 Why the trade deal couldn’t be finalized?


  • Sensitive products
    • S. specifications for medical devices and dairy and agricultural goods are seen as politically sensitive items for India.
    • As the government has often taken credit for making such items affordable.
    • Losing price controls at present is not a choice for India, as it would push up prices for these goods in the state.
  • Issues on IP, e-commerce, HIB visas
    • A full-scale trade agreement will present major challenges to problems such as intellectual property, e-commerce, and H1B visas.
  • Economic slowdown
    • With its economy in the grip of a big recession, any concessions from India on imports of American products may not have gone well, both politically and economically.


  • Elections
    • For U.S. President Trump, even a small deal with India will be something to think about as the election year progresses.
  • US-China trade talks
    • The trade talks with China are going nowhere.
    • China has not only introduced punitive tariffs on the part of the US but has also retaliated by choosing goods that could damage Trump’s electoral district and supporters.
  • It explains the hectic, behind-the-scenes operation with India over the last few weeks.
  • Despite little information in the public domain, it seems that India has been strong and has refused to give in to U.S. demands.

Way ahead

  • Trade negotiations are never quick, and for them to succeed, both sides should believe in a policy of giving and taking action.
  • It does not help when one side is trying to bulldoze the other to fully yield to its interests.
  • At this point in time, even a limited trade agreement between India and the U.S. seems to be some distance away.

Additional information

  • Generalized Scheme of Preferences (GSP) 
  • The Generalized Scheme of Preferences (GSP) is a U.S. trade policy designed to foster economic growth in the developing world by offering preferential duty fee entry to up to 4,800 goods from 129 identified recipient countries and territories.
  • Objective of GSP
    • The goal of the GSP was to support the development of poor countries by promoting exports from them to developed countries.
    • The GSP supports sustainable development in recipient countries by allowing those countries to improve and diversify their trade with the United States.
    • GSP provides opportunities for many of the poorest countries in the world to use trade to develop their economies and alleviate poverty.
  • Benefits of GSP
    • Indian exporters profit indirectly–through the gain to the importer of reduced tariffs or duty-free entry of qualifying Indian goods.
    • Reduction or elimination of import duty on an Indian commodity makes it more profitable for the importer–other items (e.g. quality) are equivalent.
    • This tariff choice helps new exporters to enter the market and existing exporters to increase their market share and boost profit margins in the donor country.
  • H-IB visa
    • The U.S. H-1B visa is a non-immigrant visa that requires U.S. companies to recruit graduate-level employees in specialized occupations. Specialized professions include theoretical and technical expertise in specialized fields such as IT, banking, accounting, architecture, engineering, mathematics, research, medicine, etc.
    • Any professional level work that usually requires a bachelor’s degree or higher may be subject to an H-1B specialty occupation visa.
    • H-1B visa holders in the US face difficulties in switching jobs, even if the new job is similar to the old one and needs the same exact skill sets.
    • The U.S. Citizenship and Immigration Services (USCIS) rejected a number of applications by the new employer, citing that the new position does not constitute a’ specialty occupation.