Zero-For-Zero Tariffs

Recently, India is exploring trade strategies with the United States amidst rising tariff threats. Industry stakeholders advocate for a zero-for-zero tariff approach. This method proposes eliminating tariffs on specific products rather than negotiating a broad trade agreement. Proponents argue this could enhance India’s export competitiveness while protecting sensitive sectors.

About Zero-For-Zero Tariffs

• Zero-for-zero tariffs involve both countries identifying specific product categories to eliminate tariffs on them.
• This arrangement aims to avoid blanket tariffs or extensive trade agreements.
• The Global Trade Research Initiative (GTRI) claims that around 90% of industrial goods traded between India and the US could qualify. This strategy allows India to maintain its trade surplus, which was approximately $46 billion in 2024.

Benefits of the Zero-For-Zero Approach

The zero-for-zero strategy offers several advantages. It can be implemented quickly, unlike lengthy bilateral trade agreements. This method is seen as beneficial for India, as it could mitigate the impact of US tariffs. By focusing on specific goods, India can protect sensitive industries such as agriculture and automobiles. The GTRI argues that potential tariffs on the remaining 10% of goods will have minimal impact.

Concerns Over Bilateral Trade Agreements

Critics of broad trade agreements warn of potential risks. They highlight the vulnerability of India’s automobile and agricultural sectors. A case study of Australia shows that reduced tariffs can harm domestic industries. The GTRI has raised concerns that US access to Indian agricultural markets could set a dangerous precedent, potentially harming millions of farmers.

Impact on the Textile Industry

The textile industry views the zero-for-zero approach favourably, particularly in light of the “China Plus One” strategy. This strategy encourages businesses to diversify away from China. With US tariffs on Chinese textiles, Indian exports could become more competitive. The GTRI estimates that eliminating tariffs could raise US textile imports from Indily.

Challenges Ahead

Despite the benefits, challenges remain. The US is keen to expand its presence in Indian markets, particularly in automobiles and agriculture. US officials have indicated a preference for comprehensive trade agreements rather than product-specific arrangements. This stance raises concerns about the future of the zero-for-zero approach and its feasibility.

Month: Current Affairs - March, 2025

Category: Economy & Banking Current Affairs