India and the United States were negotiating a bilateral trade agreement to expand trade from $191 billion to $500 billion by 2030, but negotiations have stalled due to legal, economic, and political disagreements.
Legal and Political Hurdles
- Postponement of Negotiations: Talks slowed after a US Supreme Court ruling that the power to impose tariffs lies with the US Congress, not the President, complicating executive trade commitments.
- Uncertainty over Interim Agreement: Earlier announcements of an interim trade deal lacked transparency, raising concerns about undisclosed concessions.
About Executive Order 14257
- Executive Order 14257: A legal measure used by the United States as a pressure tactic in trade negotiations with India.
- It aims to push India to open its domestic agricultural market to American products.
- Ban on Food Items: The order restricts certain Indian food products from entering the US market.
- Proposed Trade-off: The US indicates that if India allows greater access to its agricultural sector, it may reduce tariffs on Indian exports such as textiles, jewellery, and leather.
- These sectors are major sources of employment in India, allowing the US to use tariff concessions as leverage to gain access to India’s sensitive agricultural market.
- India’s Demands: Reduced US tariffs on labour-intensive exports such as textiles, leather, and jewellery, along with cooperation in defence, clean energy, LNG, crude oil, ethanol, and civil aviation.
Risk of Agricultural Dumping
- Dumping Concerns: Cheap subsidised US farm products could flood Indian markets and undermine domestic agriculture.
- Unequal Competitiveness: US farmers benefit from high subsidies, advanced infrastructure, and lower production costs, whereas Indian farmers face higher input costs.
- Socio-economic Implications: With over half of India’s population dependent on agriculture, large-scale imports could intensify rural distress.
WTO Framework and Subsidy Debate
- Subsidy Classification: India’s Minimum Support Price (MSP) and farm subsidies fall under the WTO’s “Amber Box”, considered trade-distorting.
- Perceived Bias: Developing countries argue that the Agreement on Agriculture (1995) disproportionately favours developed economies that continue to impose large subsidies.
- Food Security Concerns: India treats food security and food sovereignty as strategic priorities and resists constraints on domestic support.
About WTO Subsidy Boxes (Agreement on Agriculture)
- Amber Box: Trade-distorting subsidies that influence production and prices. The WTO requires members to reduce these supports.
- Blue Box: Subsidies linked to production-limiting programmes. These are considered a conditional category of Amber Box support.
- Green Box: Non-trade-distorting subsidies allowed without limits, typically for environmental protection, research, or rural development.
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Cultural and Health Sensitivities
- GM Crops: India resists US demands to import GM crops due to incomplete long-term toxicity studies, uncertain inter-generational health effects, and broader public health concerns.
- Dairy Concerns: US dairy imports face resistance because US cattle are often fed animal-based feed (blood or bone meal), which conflicts with India’s cultural and religious norms mandating vegetarian feed for cattle, making it a sensitive issue.
Ethanol, Non-Tariff Barriers and Geopolitics
- US Objective: The United States seeks to export soybeans and corn to India for ethanol production.
- Risk to India: This is viewed as a potential “trap” because India already has a surplus of animal feed.
- Supply Chain Disruption: Importing US soybeans and corn could disturb the domestic supply chain, as the local market is already saturated.
- Lopsided Negotiations: It reflects a red flag in negotiations where the US pushes its biofuels and farm goods without offering adequate reciprocal market access for Indian exports.
Major Red Flags in Negotiations
- Indirect Market Access: Interim arrangements could allow US agricultural products to enter the market without full reciprocity.
- GM Crop Concerns: Potential health and environmental implications for India.
- Dairy Cultural Conflict: Risk of violating religious and ethical dietary norms.
- WTO Structural Bias: Global trade rules perceived to favour developed economies.
- Imbalanced concessions: US emphasis on market access for its products without proportionate benefits for Indian exports.
Conclusion
The proposed BTA reflects the tension between trade liberalisation and domestic economic security.
- A sustainable agreement will require balanced reciprocity, protection of sensitive sectors like agriculture, and alignment with India’s food security and cultural considerations.
28 Mar 2026
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