India, Japan Reject US's Farm, Dairy Demands. What Next For Indo-US Trade Deal?

Rajesh Agrawal, Additional Secretary, Commerce and Industry Ministry, is in the US to lead negotiations on a possible “trade framework” before the deadline ends. However, this — if it happens at all — will just be the first phase of the trade deal.

India's agriculture sector has emerged as a major challenge in the negotiations. India, which was earlier hoping to ink a bilateral trade agreement (BTA) before July 9, has decided not to give in to US demands on the dairy and agriculture sectors.

The issue related to the US’s demand to sell genetically modified products, which are banned in India, has also come as a pain point, even after Niti Aayog recommended that these be allowed. There is massive opposition from all corners, including farmers, to allowing GM crops in India.

“Talks will continue, and issues, especially over the dairy and agriculture sectors, will have to be looked into. Nothing can happen in a hurry,” a person familiar with the development told The Secretariat.

Sources said New Delhi should wait and watch to understand what other countries get in their respective trade agreements with the US, before taking a final call on the deal. Because once it is sealed, little can be done. Meanwhile, Trump has indicated that the tariff pause window will not be extended. 

Why Is India's Farm Sector The Roadblock?

It is not just India; even Japan has refused to budge on accepting US demands over the agriculture sector.

"To show people how spoiled Countries have become with respect to the United States of America, and I have great respect for Japan, they won't take our RICE, and yet they have a massive rice shortage," Trump posted on the Truth Social platform.

Tokyo, which showed unwillingness to import larger quantities of American rice, said it will not do anything that could harm its agriculture sector. 

"We've dealt with Japan. I'm not sure we're going to make a deal. I doubt it," Trump told reporters on Tuesday. In the 90-day tariff pause window, Washington has managed to ink a bilateral trade deal only with the UK.

Even during the pause, the 10 per cent universal tax on imports for most countries continued. Besides, the Trump administration’s decision in March to impose a 25 per cent tariff on steel and aluminium products is also in place.

India is now aggressively looking to expand and diversify its export markets. It is looking to ink trade deals with the EU and Oman, for example. In the case of the EU, India — its 9th largest trading partner — halted FTA negotiations due to differences in scope and expectations from the deal. 

Meanwhile, on May 6, it signed the India-UK free trade agreement (FTA). Experts opine that the framework of this deal should serve as the template for all other FTAs India signs.