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The potential India-US Bilateral Trade Agreement (BTA), often referred to as a Free Trade Agreement (FTA), is encountering significant headwinds due to the absence of Fast Track Trade Authority (FTTA) in the United States. This critical mechanism, also known as Trade Promotion Authority (TPA), has historically streamlined the approval process for trade deals, ensuring a swift up-or-down vote in Congress, thereby minimizing the risk of political obstruction and amendment. Without FTTA, any agreement reached between India and the US faces the prospect of protracted scrutiny, potential alterations, and even outright rejection by US lawmakers. This uncertainty introduces a significant element of risk for India, as there is no guarantee that the final agreement will reflect the initial understanding. The Global Trade Research Initiative (GTRI) report released recently highlights these concerns, warning of the potential for the US to unilaterally renegotiate key provisions after the agreement is signed, leaving India vulnerable to shifting demands and an uneven playing field. This report has been released as a US delegation arrived in New Delhi for trade talks, further underlining the timeliness and importance of addressing these concerns. The absence of FTTA means that the agreement will have to navigate the standard legislative process, where individual lawmakers can propose amendments, demand concessions, or even block the entire deal. This process exposes the agreement to the vagaries of domestic politics and special interest lobbying, potentially undermining the original intent and benefits for both countries. The US's post-FTA certification process adds another layer of complexity and risk. This mechanism allows the US to unilaterally determine whether a trade partner has fulfilled its obligations before the agreement takes effect. The GTRI report points out that the US has used this process in the past to demand additional legal or policy changes after deals were signed, effectively renegotiating key provisions and imposing new requirements on its trade partners. Examples from past FTAs, such as the US-Panama FTA, which took over five years to implement due to certification delays, and the experiences of Peru and the Dominican Republic, which were required to enact new laws and regulations to comply with US demands, illustrate the potential for this process to be used to extract additional concessions from trade partners. Furthermore, corporate lobbying in the US can significantly influence trade policy and certification requirements. Industries such as pharmaceuticals, agriculture, and energy often exert pressure on policymakers to secure favorable terms, such as stricter intellectual property laws, food safety standards, and regulatory changes. This can further complicate the negotiations and create an uneven playing field for India. Despite these challenges, some stakeholders remain optimistic about the prospects for a deal. Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO), believes that the US President's commitment to reaching a BTA by the fall of 2025 suggests that mechanisms are in place to ensure its completion. He suggests that the US could outline the framework for the agreement before formal negotiations begin, potentially mitigating some of the risks associated with the absence of FTTA. However, it is important to acknowledge the significant hurdles that remain and the potential for the agreement to be significantly altered or delayed due to the absence of this crucial mechanism. The trade ambitions of both countries are significant. India and the US aim to expand bilateral trade from $200 billion to $500 billion by 2030. India is seeking mutual tariff reductions as part of the deal, while the US is focused on addressing high tariffs on agricultural products, creating a level playing field in the e-commerce sector, and removing non-tariff barriers that restrict access for US goods and services. While India has already taken steps to address some of these concerns, such as reducing tariffs on motorcycles and bourbon whiskey, significant differences remain. The success of the BTA will depend on the ability of both countries to navigate these challenges and reach an agreement that is mutually beneficial and sustainable in the long term. The impact of a potential India-US free trade agreement could be substantial, with key beneficiaries including textiles, pharmaceuticals, IT, and agriculture. However, sensitive sectors like dairy and manufacturing may face risks. Market access, tariff reductions, and regulatory alignments would shape its impact on both economies. This deal needs to be constructed very carefully. Without the FTTA, the deal is definitely imperiled.
The absence of FTTA significantly alters the dynamics of the trade negotiations, shifting the balance of power in favor of the United States. With FTTA in place, the US President can negotiate a trade deal and present it to Congress for a simple up-or-down vote, without the possibility of amendments. This provides certainty for both parties and reduces the risk of the agreement being derailed by domestic political considerations. Without FTTA, however, the agreement is subject to the full legislative process, where individual lawmakers can propose amendments, demand concessions, or even block the entire deal. This creates a much more uncertain environment for India, as there is no guarantee that the final agreement will reflect the initial understanding. The GTRI report emphasizes the vulnerability of India in this situation, highlighting the potential for the US to unilaterally renegotiate key provisions after the agreement is signed. This could lead to India being forced to make concessions that it would not have otherwise agreed to, potentially undermining the benefits of the FTA. The report also points out the risk of the US using its post-FTA certification process to demand additional legal or policy changes from India. This process allows the US to unilaterally determine whether India has fulfilled its obligations before the agreement takes effect, giving the US significant leverage to extract further concessions. Past experiences with other countries, such as Panama, Peru, and the Dominican Republic, demonstrate the potential for this process to be used to impose additional requirements and delay the implementation of the agreement. Furthermore, corporate lobbying in the US can play a significant role in shaping trade policy and certification requirements. Industries such as pharmaceuticals, agriculture, and energy often exert pressure on policymakers to secure favorable terms, potentially at the expense of India. This can further complicate the negotiations and create an uneven playing field for India. The combination of the absence of FTTA, the potential for unilateral renegotiation, the risk of post-FTA certification demands, and the influence of corporate lobbying creates a challenging environment for India. It is crucial for India to carefully assess the risks and potential benefits of the BTA and to negotiate strategically to protect its interests. The Indian government should also be prepared to walk away from the deal if the terms are not favorable. The absence of FTTA does not necessarily mean that a deal is impossible, but it does mean that India needs to be extra cautious and assertive in its negotiations to ensure that it secures a fair and beneficial agreement.
The current situation calls for a reassessment of India's negotiating strategy. While the pursuit of a deeper economic partnership with the US is undoubtedly beneficial, it is imperative that India approaches these negotiations with a clear understanding of the inherent risks and challenges posed by the absence of FTTA. A more proactive and assertive approach is needed to safeguard India's interests and ensure a mutually beneficial outcome. First and foremost, India must insist on greater transparency and predictability in the negotiation process. This includes seeking assurances from the US that the final agreement will not be subject to unilateral renegotiation or undue pressure from corporate lobbying. Clear and enforceable mechanisms for dispute resolution are also essential to protect India from unfair trade practices. Secondly, India should leverage its own strengths and bargaining power to secure favorable terms. This includes highlighting the importance of the Indian market to US businesses and emphasizing the potential for increased trade and investment in key sectors. India can also point to its progress in reducing tariffs and removing non-tariff barriers, demonstrating its commitment to creating a more open and competitive trading environment. Thirdly, India should actively engage with US lawmakers and stakeholders to build support for the BTA and address any concerns they may have. This includes providing clear and accurate information about the benefits of the agreement for both countries and highlighting the potential for increased job creation and economic growth. Fourthly, India should explore alternative options and diversify its trade relationships. This includes strengthening ties with other major economies, such as China, the European Union, and Japan. By diversifying its trade portfolio, India can reduce its dependence on the US and mitigate the risks associated with the current situation. Finally, India should be prepared to walk away from the deal if the terms are not favorable. A bad deal is worse than no deal, and India should not compromise its long-term interests for the sake of short-term gains. By adopting a strategic and proactive approach, India can navigate the challenges posed by the absence of FTTA and secure a fair and beneficial trade agreement with the US. However, it is crucial to recognize the risks and be prepared to walk away if necessary. The success of the BTA will depend on the ability of both countries to work together in a spirit of mutual respect and cooperation, but India must be prepared to stand its ground and protect its interests.
Source: India’s US trade deal at risk without fast-track authority: GTRI