India, US to talk defence during Trump’s visit, little progress on trade

India is in no rush to finalise a trade deal with the US that compromises national interests though some big ticket defence purchases, including a $2.6-billion deal for Seahawk helicopters, are expected to be finalised during President Donald Trump's visit, people familiar with the developments said on February 19.

Following intense exchanges on trade-related issues in recent months, commerce minister Piyush Goyal and US trade representative Robert Lighthizer had mutually agreed not to rush into a deal in view of the complicated issues involved, said the people who asked not to be identified.

Trump too downplayed the possibility of a limited trade package being unveiled when he visits India during February 24-25, saying on Tuesday he was "saving the big deal for later on", possibly after the US election in November, when he will seek a second term, Hindustan Times reported.

"We're doing a very big trade deal with India. We'll have it. I don't know if it will be done before the election, but we'll have a very big deal with India," Trump told reporters in Washington.

In New Delhi, a person familiar with the planning for the visit said the goal was to reach "an understanding on trade with an outcome that strikes the right balance for both sides" as India was still grappling with the consequences of free trade agreements (FTAs) signed during 2010-11. India is also keen to take things forward to the level of having an FTA with the US, the person added.

"Both Lighthizer and Goyal mutually agreed that we don't want to rush into a deal as the issues are complicated and with many decisions potentially having an impact on people's lives and long-term economic consequences," the person said.

The two sides should look to win-win solutions for the future instead of making short-term decisions. "As we do that, we don't want to have any compromise when it comes to the interests of the people of our country and we are not in a hurry to rush into a trade deal on the eve of the visit," the person added.

There was considerable speculation that the two sides would finalise a limited trade package ahead of Trump's visit but were reportedly unable to reach common ground on contentious issues such as market access, opening Indian markets to dairy and agricultural products, and medical devices and data localisation. India, for its part, wants the restoration of benefits under the Generalised System of Preferences, which were withdrawn last year.

"While the absence of a trade pact hasn't dented the mutual enthusiasm in expanding trade and investment ties, we want India and the US to become FTA partners. That is an objective that has been stated before, and we continue to state that objective as one both countries aspire to," said the person cited above.

The two sides, however, are expected to conclude some defence and energy deals, with people familiar with developments saying the Cabinet Committee on Security had on Wednesday cleared the $2.6-billion deal for 24 MH-60R helicopters for the Indian Navy's anti-submarine warfare and surveillance operations.

India's main gas importer, Petronet, and US liquefied natural gas (LNG) developer Tellurian are also expected to sign a $2.5-billion deal to invest in the Driftwood LNG project in Louisiana and get rights for up to 5 million tonnes of gas a year.

The people said defence cooperation, especially in military hardware purchases and joint research and development, was robust and India has procured hardware worth more than $18 billion from the US. Hydrocarbon imports in the past two years had risen to $7 billion and the US is now India's sixth largest source of oil imports.

All of this has resulted in bilateral trade growing at more than 10% per annum in the past few years, with the total figure set to cross $150 billion this year, while the deficit has steadily declined and trade had become more balanced, the people said.

Referring to Trump's comments that the US is treated unfairly by India, the people said New Delhi doesn't agree with Washington's view that India is a high tariff country. India's tariffs are no higher than those of other developing countries, while even Korea and Japan have higher tariffs in some sectors, they said.

The people said the issue of a trade deal wasn't stuck and opening Indian markets to US dairy and poultry products is not a sticking point. More time is needed to cover a wide range of areas and the two sides will continue to talk to reach both the trade deal and an FTA, they said.

Trump didn't appear happy about the trade situation and fell back on his old grievances, saying: "We're not treated very well by India... But I happen to like Prime Minister Narendra Modi a lot and he's hoping we'll have seven million people at the airport."

He was referring to crowds he expects to see from the airport to Motera Stadium, the world's largest cricket stadium, which he will inaugurate before addressing the "Namaste Trump" rally with Modi on the lines of the "Howdy Modi!" event in Houston last September.

Trump's high-level delegation is expected to include Lighthizer, commerce secretary Wilbur Ross, treasury secretary Steven Mnuchin, adviser Jared Kushner, White House chief of staff Mick Mulvaney and national security adviser Robert O'Brien. His visit will last a little less than 36 hours, and will be the shortest US presidential visit since Richard Nixon's visit of some 22 hours in 1969.

The continued uncertainty about the limited trade package played out poorly in the US. "The inability to ink even a modest trade pact would be a setback, dampening hopes for progress until the presidential elections are over," said Atman Trivedi, a former department of commerce official, referring to the talks that were underway before Lighthizer pulled out of a planned trip to New Delhi last week.