US trade deal in final lap: Commerce secretary Rajesh Agrawal

India's global economic engagement is currently at a crucial juncture, marked by dynamic negotiations with major economic blocs like the United States and the European Union. The recent statement by Commerce Secretary Rajesh Agrawal sheds light on the contrasting progress in these two critical trade dialogues, offering a window into India's evolving trade diplomacy and its implications for the nation's economic future.

**Background Context and What Happened:**

India, having embarked on economic liberalization in 1991, has progressively integrated into the global economy, recognizing the imperative of international trade for sustained growth. Over the past decades, India has pursued various bilateral and multilateral trade agreements to enhance market access for its goods and services, attract foreign investment, and foster technological collaboration. The current developments reflect this ongoing strategy. On one hand, India and the United States are reportedly on the verge of finalizing a "framework trade deal." This signifies a significant step towards deepening economic ties between the two largest democracies, building on existing strategic partnerships like the Quad and various bilateral dialogues. Such a deal, even if not a comprehensive Free Trade Agreement (FTA), aims to address specific trade barriers, streamline customs procedures, and facilitate market access for certain products, thus providing a predictable and stable trade environment. The US has been a critical trade partner for India, with bilateral trade reaching a record $128.55 billion in 2022-23, making the US India's largest trading partner. On the other hand, negotiations for a comprehensive Free Trade Agreement (FTA) between India and the European Union have hit a "difficult phase." The primary sticking point is the EU's proposed Carbon Border Adjustment Mechanism (CBAM), which seeks to impose a carbon levy on imports of certain carbon-intensive products. This mechanism, set to be fully implemented by 2026, aims to prevent 'carbon leakage' – where companies might move production to countries with less stringent climate policies. India views CBAM as a potential non-tariff barrier that could significantly impact its exports, particularly in sectors like steel, aluminum, cement, and fertilizers, which are vital for its economy.

**Key Stakeholders Involved:**

Several key players are central to these trade negotiations. **For India**, the **Ministry of Commerce and Industry**, led by the Commerce Secretary, is the primary negotiating body. Indian businesses, including exporters and manufacturers, are crucial stakeholders, as their market access and competitiveness are directly impacted. Farmers and consumers also have a vested interest in the availability of goods and services at competitive prices. The **Ministry of External Affairs** plays a role in aligning trade policy with broader foreign policy objectives. **For the United States**, the **Office of the United States Trade Representative (USTR)** leads negotiations, representing the interests of American industries (e.g., agriculture, technology, manufacturing) and workers. The **US Congress** also exerts influence through its oversight and approval powers for trade agreements. **For the European Union**, the **European Commission** acts as the negotiating body, representing the collective interests of its 27 member states. European industries, particularly those concerned about climate change and fair competition, also influence the EU's stance, with the **European Parliament** having to ratify any final agreement.

**Why This Matters for India:**

These trade developments hold immense significance for India. A successful framework deal with the US could provide enhanced market access for Indian goods and services, particularly in areas like textiles, pharmaceuticals, and IT services, boosting export revenue and job creation. It would also signal a strengthening of the India-US strategic partnership, crucial for geopolitical stability and economic resilience in a multipolar world. Conversely, the challenges in the India-EU FTA, especially concerning CBAM, pose a significant threat to India's export competitiveness. The EU is a major export destination for India, and the imposition of carbon tariffs could make Indian products more expensive, potentially leading to trade diversion and economic losses. This forces India to accelerate its green transition in carbon-intensive industries to comply with international environmental standards, which, while beneficial in the long run, presents immediate economic and technological challenges. From a constitutional perspective, India's engagement in international trade agreements is governed by **Article 253** of the Constitution, which empowers Parliament to make laws for implementing international treaties, agreements, and conventions. Furthermore, subjects like 'trade and commerce with foreign countries' fall under **Entry 41 of the Union List** in the Seventh Schedule, granting the central government exclusive legislative competence over foreign trade policy. The current **Foreign Trade Policy (FTP 2023)** emphasizes making India a global trading hub and supporting domestic manufacturing under the 'Make in India' and 'Atmanirbhar Bharat' initiatives, which inform India's negotiating stance.

**Future Implications:**

The successful conclusion of the framework deal with the US could pave the way for more comprehensive economic cooperation and potentially a full FTA in the future. It would also reinforce India's position as a reliable and attractive destination for foreign investment. For the EU FTA, resolving the CBAM issue is paramount. India is actively exploring options, including seeking exemptions, developing its own carbon pricing mechanisms, or negotiating a mutually acceptable solution. The outcome of these negotiations will significantly shape India's trade policy trajectory, influencing its diversification strategies, its commitment to climate action, and its overall geopolitical alignment. India's ability to navigate these complex trade dynamics will be crucial for achieving its ambitious economic growth targets and enhancing its global standing.