Tariff Deadline Looms: Will India Cave to Trump’s Demands on Farm Trade?

The July 9 moratorium on tariffs, announced by US President Donald Trump in April, is set to end, and countries across the world are scrambling to cut trade deals with the United States of America. India is no exception; the delegation spearheaded by Rajesh Agarwal and his team has extended their stay in the US to finalize the fine print of the trade deal between India and the US. But there is one area that emerged as the matter of great discussion between both the nation and that is agriculture.
 

Traditionally, India has kept agriculture out of all free trade agreements. There is a logical explanation for the caution exercised by Indian governments in the last few years. The agricultural sector and its allied sectors together contribute around 16 percent to Indian GDP, but they employ almost half of the 1.4 billion population in India. Considering the influence and power this segment of the economy holds, the government has managed it delicately over the last few years. The same restraint and caution were exercised by the government during past WTO negotiations when developed countries wanted India to phase out its agricultural subsidies, but India maintained its harder stance and did not budge.

But what makes the Indian government so particular about the agricultural sector? Opening the sector for foreign players is seen as a direct threat to the survival of farmers.
 

The average land size and average herd size owned by Indian farmers make it difficult for them to compete with the global players with very large land and herd sizes. In addition, India’s long-standing policy of not allowing GMs to enter into the Indian market makes the discussion around market access for foreign players a little tricky.

Experts view the entry of foreign players into the Indian agricultural and dairy sectors as having a huge impact on the profitability of Indian farmers. Once the entry is allowed, Indian markets will be flooded with cheaper agricultural produce, making it tough for Indian farmers to compete and leading to a crash in market prices naturally, threatening the survival of the agricultural community.

Why Trump Is Fighting For Farmers

In the US presidential election, Donald Trump was backed by the immense support of rural America and American farmers. Now, in return, he is seeking greater market access for American farmers to Indian markets.  Farmers hold a huge sway in American politics, and Trump is exactly trying to tap into that influential segment in America. But India, following its long-standing position, is trying hard to keep the agricultural sector insulated from the US-India trade deal. 

The United States is asking for larger market access for genetically modified fruits and vegetables. But India is opposed to the idea of allowing GMs into Indian markets, as this will flood Indian markets with cheaper agricultural produce that will push the Indian farmers to bring down the prices to compete with US imports, which will have a huge impact on the profitability of Indian farmers.

 

But as per many media reports, there are chances of India allowing some GMOs into the Indian market for animal feeding purposes and a little access for apples to Indian markets. But as the delegation has extended its stay to discuss the fine print of the Indo-US trade deal, the reports are suggesting that as the tariff moratorium end looms on July 9, both nations can come up with a mini trade deal in the next 24-48 hours.

Vietnam: A Classic Case 

Donald Trump, a few days back, took to Truth Social to tell the world that Vietnam and the US have sealed an unprecedented trade deal under which Vietnamese exports to the US will attract a flat tariff of 20 per cent. This deal, as per experts, presents a cautionary tale for India. As the current deal will replace the Bilateral Investment Treaty of 2002, under which Vietnamese exports to the US were attracting tariffs of 2-10 percent.  Now,  Vietnamese exports worth $135 billion are impacted because of the imposed tariffs.

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