India–U.S. Interim Trade Framework: Advancing Reciprocal Market Access
Context
India and the United States have jointly announced an Interim Trade Framework, representing a crucial step forward in bilateral economic engagement through calibrated tariff adjustments and enhanced market access, ahead of a comprehensive trade pact.
Interim Trade Framework Between India and the U.S.: Key Details
Nature of the Arrangement:
The framework is a transitional trade mechanism focused on delivering early, tangible outcomes in areas such as tariffs, regulatory barriers, and trade facilitation, while discussions continue on a long-term Bilateral Trade Agreement.
Underlying Intent:
- To rebalance bilateral trade through reciprocal concessions
- To unlock new export opportunities in goods, agriculture, energy, and technology
- To reinforce secure and resilient supply chains
- To act as a confidence-building step towards a rules-based trade architecture
Major Components of the Trade Framework
Market Access Commitments by India:
India will undertake selective tariff reductions and eliminations on U.S. industrial products and agricultural items, including ethanol co-products (DDGs), oilseeds, fruits, nuts, wine, and alcoholic beverages.
Tariff Adjustments by the United States:
The U.S. will introduce a reciprocity-based tariff rate of 18% on identified Indian exports, coupled with a clear transition pathway for tariff withdrawal in priority sectors such as generic medicines, gems and jewellery, and aerospace components, subject to successful negotiations.
Easing of Security-Linked Trade Restrictions:
The agreement provides for relief from Section 232 measures, covering Indian aircraft parts and steel- and aluminium-associated products, along with preferential tariff-rate quotas for specific automotive inputs.
Safeguards on Trade Origin:
Both sides have agreed on robust rules of origin to ensure that trade benefits accrue exclusively to Indian and U.S. producers, limiting third-country routing.
Addressing Regulatory and Procedural Barriers:
India has committed to streamlining non-tariff measures affecting medical devices, ICT products, and agricultural imports, including reforms in licensing procedures and mutual recognition of standards.
Regulatory Cooperation and Standards Alignment:
The framework promotes cooperation on technical regulations, conformity assessments, and testing mechanisms to reduce compliance costs and improve predictability for businesses.
Digital Economy Engagement:
Both countries will engage on digital trade concerns, including non-discriminatory practices, with the objective of shaping high-standard digital trade provisions under the future BTA.
Supply Chain Security and Strategic Coordination:
The framework emphasises coordination on export controls, investment screening, and collective responses to non-market economic practices of third countries.
Long-Term Strategic Purchases:
India has outlined plans to source USD 500 billion worth of U.S. products over five years, spanning energy resources, civil aviation, critical minerals, and advanced technologies, including high-performance computing equipment.
Source : PIB