In a sharp yet strategic assessment, the Global Trade Research Initiative (GTRI) has advised India to tread cautiously on pursuing a comprehensive Free Trade Agreement (FTA) with the United States, warning that such a deal may bring more harm than benefit to India’s core economic sectors.
In This Article:
As global geopolitics continue to shift and trade alliances take center stage, this caution from GTRI arrives at a crucial time—just days after the U.S. temporarily paused the imposition of an additional 26% tariff on Indian imports. While this deferral seems diplomatic on the surface, GTRI believes the long-term implications of a full-scale FTA could be damaging.
The Risks of a Comprehensive FTA with the U.S.
GTRI’s core argument rests on the observation that U.S. trade demands often come with strings that could undermine India’s domestic priorities. Key concerns flagged include:
- Dismantling of the Minimum Support Price (MSP) system, which supports millions of Indian farmers.
- Entry of Genetically Modified (GM) foods, raising concerns over biodiversity and public health.
- Changes to patent laws, which could extend drug monopolies and affect affordable access to medicines.
- Opening the market to American e-commerce giants, potentially impacting small Indian retailers.
The think tank warns that these demands may compromise India’s sovereignty in agricultural policy, damage rural livelihoods, and weaken India’s pharmaceutical and retail industries.
Industrial Impact and the Australian Cautionary Tale
Automobiles, a sector responsible for nearly a third of India’s manufacturing output, could face a severe blow if import tariffs are slashed. GTRI draws a parallel with Australia, where deep tariff cuts in the 1990s led to the collapse of the domestic car industry. A similar fate, it warns, could befall Indian industries if comprehensive trade liberalization is not carefully managed.
GTRI’s Alternative: A Limited Zero-for-Zero Deal
Instead of a full-fledged FTA, GTRI suggests a “zero-for-zero” tariff deal that focuses solely on 90% of industrial goods, leaving out sensitive sectors such as agriculture, automobiles, and pharmaceuticals. This model, currently in use between the EU and the US, would allow both nations to engage in mutually beneficial trade without forcing either party to make economically or politically costly compromises.
Such a focused agreement would ensure that India does not have to weaken its regulatory frameworks or offer unilateral concessions. It also offers a cleaner, more manageable path toward a WTO-compliant, goods-only agreement.
Strengthening Strategic Partnerships
GTRI further recommends that India prioritize trade negotiations with Europe, Canada, and the UK, which may be more aligned with India’s economic goals and sensitive to its domestic constraints. Interestingly, the think tank also calls for deeper integration with China in non-contentious sectors like chemicals, electronics, and machinery, where mutual dependencies can drive co-created value chains.
“By using each other’s raw materials and intermediates,” said GTRI founder Ajay Srivastava, “India and China can increase local value addition and improve export competitiveness.” Such regional cooperation could offer near-term advantages, bypassing geopolitical hurdles through economic pragmatism.
Domestic Reforms: The Need of the Hour
While trade deals matter, GTRI also emphasizes the importance of domestic trade ecosystem reform. Recommendations include:
- Simplifying and rationalizing tariffs
- Ensuring smooth implementation of quality control orders
- Streamlining GST and logistics processes
- Digitizing customs and port procedures
These reforms are crucial if India wants to truly capitalize on emerging global trade shifts. A modern, resilient internal framework will not only strengthen India’s bargaining power in trade talks but also improve its ease of doing business globally.
India is at a crossroads. While deeper trade ties with the U.S. are strategically attractive, they must be negotiated from a position of strength and caution. GTRI’s suggestion of a limited, industrial-goods-only tariff agreement provides a balanced roadmap—one that supports economic growth without sacrificing domestic interests.
With shifting global dynamics, India’s focus should be on smart trade alignments, domestic readiness, and selective globalization—not blanket liberalization. The time to rethink the India US trade agreement is now, before irreversible decisions are made.
By – Jyothi
Also Read – Indian-Origin Kash Patel Removed as Acting ATF Chief in Sudden DOJ Shake-Up
