Oil, tariffs and farming: What we still don't know about US-India trade deal
Oil, Tariffs, and Farming: What We Still Don't Know About the US-India Trade Deal
The anticipation surrounding a major bilateral US-India trade agreement has reached a fever pitch. Both governments have signaled readiness, yet the actual framework remains frustratingly opaque. What started as discussions for a "mini-deal" to resolve immediate tariff disputes has ballooned into a complex negotiation spanning energy security, agricultural subsidies, and critical geopolitical strategy.
As a seasoned observer of global supply chains, I recently spoke with a textile exporter in Mumbai. His primary frustration wasn't just the duties on his goods; it was the unpredictable policy environment. "We plan our entire year around the potential for the Generalized System of Preferences (GSP) to be reinstated," he told me. "Every month of delay is revenue lost, and we have zero clarity. We are negotiating in the dark."
That sentiment—the lack of transparency regarding specific outcomes—defines the current state of US-India trade relations. While high-level meetings offer pleasant photo opportunities, the devil is locked tightly in the details. Three major sectors continue to serve as the critical sticking points, demanding resolution before any official signing can occur.
The Crude Reality: Geopolitics, Energy Security, and Oil Tariffs
The energy sector is perhaps the easiest to quantify in terms of dollars, but the hardest to resolve geopolitically. India is one of the world's fastest-growing energy consumers. Its primary objective is diversification and price stability; the US seeks to solidify its position as a major crude supplier and reduce India's reliance on sources like Russia or, historically, Iran.
The US is pushing for India to increase its purchases of American crude oil and liquefied natural gas (LNG), framing this as a key element of the Strategic Partnership. India has already made significant strides, becoming a major buyer of US oil since 2017. However, the uncertainties remain centered on long-term commitment and specific pricing mechanisms.
What specifically is unclear? We still lack concrete commitments regarding the volume and tenure of future oil contracts. Are these merely commercial contracts, or will they be backed by government guarantees? More critically, the US wants greater access for its renewable energy technology, while India fiercely protects its domestic solar and wind manufacturing sectors.
- Pricing Structure: Details on preferential pricing for US crude compared to Middle Eastern supplies remain confidential.
- Strategic Petroleum Reserve (SPR): Discussions about India potentially using US facilities or coordinating SPR releases in times of crisis—a major trust-building measure—have been rumored but not confirmed.
- Retaliatory Tariffs: India imposed tariffs on specific US products, including almonds and apples, in response to the US ending the GSP status. The reciprocal lifting of these energy-related tariffs is often tied directly to movement on the GSP issue, creating a complex dependency.
The energy relationship is less about outright tariffs and more about market access and long-term security. India's priority is reducing its vulnerability to global oil price shocks. The US's priority is embedding India firmly within its energy supply chain ecosystem, a move that carries significant geopolitical weight.
The Farm Divide: Dairy Market Access and Agricultural Subsidies
The agricultural sector presents the most emotionally charged and politically sensitive obstacle. For India, protecting its vast population of small and marginal farmers is paramount. For the US, gaining enhanced market access for its highly subsidized, capital-intensive farm exports—particularly dairy and specialized crops—is non-negotiable.
The issue of US dairy access has been a perennial sticking point. India maintains stringent non-tariff barriers, often citing religious and dietary sensitivities. US negotiators insist on easing standards for milk products, which they argue are based on sound science and global benchmarks. The fear among Indian politicians is that opening the market to US dairy—a product often cheaper due to heavy government subsidization—could decimate millions of local livelihoods.
"We can concede on mobile phone tariffs, but farming is different," noted a New Delhi think tank analyst recently. "The political cost of allowing cheap imports to flood the rural market is too high for any Indian government."
What Specific Agricultural Tariffs Are Still Being Debated?
Beyond dairy, the negotiations are bogged down in disputes over specific product lines where India applies high duties to protect domestic producers:
- Medical Devices: US demands relief on price caps and import duties for devices like stents and knee implants. India argues these caps are necessary to ensure affordable healthcare for its citizens.
- Almonds and Walnuts: These specialty crops were hit hard by India's retaliatory tariffs. While there is consensus that these duties should be removed, the mechanism and timing of their removal remain uncertain.
- Poultry and Egg Products: Sanitary and phytosanitary (SPS) measures applied by India act as significant non-tariff barriers, which the US views as protectionist measures disguised as health concerns.
The ultimate unknown here is the extent of India's concession on agricultural market access. Will they agree to a limited quota for high-value US dairy, or will the deal crumble over India's steadfast protection of its farmers? Until these precise market access agreements are disclosed, the agricultural component remains a major question mark.
Beyond the Immediate: IPR, Digital Trade, and the Visa Question
While oil and farming dominate the headlines, the long-term structure of the US-India economic relationship depends heavily on issues that are often negotiated away from the public eye: intellectual property rights (IPR) and the movement of people.
Intellectual Property Rights (IPR)
The US persistently ranks India on its Priority Watch List, citing weak patent enforcement and mandatory local licensing requirements, especially concerning pharmaceuticals. India, often dubbed the "pharmacy of the world," defends its stance, arguing its laws prioritize affordable access to life-saving drugs over stringent corporate patent protection.
The US is pushing for stronger enforcement mechanisms and changes to specific sections of Indian patent law. Whether the final trade pact includes concrete commitments on IPR harmonization—potentially risking India's generics industry advantage—is a major unanswered question.
The Digital Trade Frontier
Digital trade and data localization are growing sources of friction. India's push for mandatory data localization—requiring global tech firms to store sensitive user data within Indian borders—clashes with the US principle of free cross-border data flow. A successful trade deal must find a middle ground that satisfies India's sovereignty concerns while maintaining US tech giants' ability to operate efficiently.
We do not yet know the specific language defining data flow rules within the anticipated agreement. This will set the precedent for how US tech investment operates in the vast and rapidly digitizing Indian market.
H-1B Visas and Professional Movement
Crucially for India, any comprehensive trade deal must address the issue of professional movement, particularly regarding the H-1B temporary work visa program. Indian companies and professionals are the largest beneficiaries of these visas, which have faced significant restrictions and uncertainty in recent years.
India sees trade concessions as leverage to secure guarantees or increased quotas for the H-1B visa and L-1 intracompany transfers. The specific linkage between Indian market access and US immigration reform remains perhaps the most politically sensitive and least visible part of the negotiations. Will the US offer a concrete commitment on visa reform, or will this crucial demand be relegated to future, separate discussions?
The Road Ahead for Bilateral Trade
The US-India trade relationship is valued at over $160 billion annually, with substantial potential for growth. Yet, the path to a landmark deal is paved with unresolved issues concerning critical national interests: energy security, farmer welfare, and technological dominance.
What we still don't know is the level of political sacrifice each nation is willing to make. Will India risk farmer backlash to secure a return of GSP status and favorable visa policies? Will the US compromise on IPR strictness to open up a massive consumer market? The answers to these questions will define not just the bilateral trade deal, but the geopolitical alignment of the world's two largest democracies for the next decade.
Oil, tariffs and farming: What we still don't know about US-India trade deal
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