Bilateral Trade Agreement between India and the U.S.
During Prime Minister’s visit to the United States on February 13, 2025, both nations agreed to negotiate the first stage of a multi-sector Bilateral Trade Agreement (BTA) by the fall of 2025.
Understanding International Trade Law
- The agreement must align with the World Trade Organization (WTO) law, as both countries are members.
- The General Agreement on Tariffs and Trade (GATT) codifies a significant portion of international trade law.
Scope and Nature of the BTA
- The specifics of the BTA are currently unclear, and it is not labeled as a free trade agreement (FTA).
- The WTO operates on the most favoured nation (MFN) principle, which prohibits discrimination between trading partners.
Legal Requirements for a Valid FTA
- Article XXIV.8(b) of the GATT requires FTAs to eliminate trade barriers on "substantially all the trade" between members.
- The BTA must be notified to the WTO.
Challenges and Strategic Considerations
- Reducing tariffs on each other's products without extending it to others violates WTO law.
- An 'interim agreement' under Article XXIV of GATT may be pursued as a pathway towards an FTA.
- The U.S. approach of 'reciprocal tariffs' challenges WTO principles of MFN and special and differential treatment (S&DT).
Conclusion
The proposed BTA negotiations are critical for India to uphold WTO laws amidst potential U.S. pressures. As a champion of a rule-based trading order, India should resist any dilution of core WTO principles.
