President Donald Trump says he wants a trade agreement with India, but suggested Tuesday that a partial pact will come first, followed by a more comprehensive deal later this year or after the election.

The president and First Lady Melania Trump are scheduled to visit New Delhi and Ahmedabad, India next Monday and Tuesday.

“Well, we can have a trade deal with India, but I’m really saving the big deal for later on,” Trump said Tuesday, ahead of his trip there next week. “We’re doing a very big trade deal with India. We’ll have it. I don’t know if it’ll be done before the election, but we’ll have a very big deal with India.”

It’s unclear if agriculture would be part of that initial deal, but Senate Finance Committee Chairman Chuck Grassley says it may be.

He said he expects a “mini trade agreement” that will get some additional market access, perhaps for U.S, ag and medical technology, but added that it won’t be a “big deal” like the recent U.S.-China pact or the U.S.-Mexico-Canada Agreement.

Meanwhile, negotiations are underway ahead of Trump’s visit to the country early next week. A trade agreement with the second-most populous country in the world offers holds the potential for billions of dollars in new U.S. ag trade, but there are signs that talks are not going smoothly.

U.S. negotiators “have been working like crazy on this for several months,” one government source tells Agri-Pulse, but U.S. Trade Representative Robert Lighthizer has not yet traveled to India ahead of Trump as planned. Lighthizer was scheduled to arrive in New Delhi early last week, but as of late Thursday he was still in Washington and on Tuesday of this week he was in Utah for a speaking engagement.

Lighthizer’s planned arrival in India early last week was supposed to mark the end of successful preliminary talks and the next higher-level talks on the ministerial level. The fact that that hasn’t happened yet is troubling, said one U.S. industry source who still hopes a new trade pact can be reached.

Tree nuts, apples, dairy, ethanol, distiller’s grains, poultry, pulses and other U.S. commodities could gain large new markets in the Asian country of 1.3 billion people, but the barriers may be too big for negotiators to crack anytime soon, say doubters such as National Farmers Union President Roger Johnson.

“I would hope that we enter into negotiations with India,” Johnson said. “I’m skeptical that we’d have something that will be durable before the election. … India is just a big question mark.”

Roger Johnson

Roger Johnson, NFU

The potential trade is enormous, but the obstacles negotiators must overcome include a complex web of tariffs, domestic subsidies and non-tariff barriers such as the country’s dysfunctional biotech approval process.

One of the biggest barriers to securing regulatory reform in India is the way it approves — or more appropriately, does not approve — new genetically modified traits.

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Perhaps one of the biggest losers now is distiller’s grains. Industry sources say the U.S. could easily be exporting 700,000 metric tons of it to India every year, but the country hasn't approved the biotech corn that is used to make fuel ethanol and distiller's grains, a byproduct of the distillation process that is used as livestock feed.

Until recently, biotech approvals were the responsibility of India’s Genetic Engineering Appraisal Committee — an agency that is often underfunded or hobbled during periods of political control by parties that oppose biotechnology — to approve biotech commodities or products that contain biotech material. But in 2017, India’s Supreme Court threw another wrench into the works, decreeing that all approvals had to be reassigned to the country’s Food Safety and Standard Authority of India.

Applications for approval to import distiller’s grain, soybeans, soymeal, and soy oil have been made to the GEAC, according to USDA’s Foreign Agricultural Service. The GEAC has referred all of them to the FSSAI, which has essentially done nothing. That’s because the “FSSAI is still in the process of making regulations for approval of GE food products,” says FAS in one analysis. “Until the FSSAI regulations are formulated, approved and implemented, the approvals of GE food products are currently on hold in India.”

India's tariffs are even bigger obstacles for U.S. agriculture. 

Trump has called India “the king of tariffs” and the impact of the country’s often shifting import taxes have hit American ag exporters hard. Earlier this month, the country announced its most recent increase in tariffs on butter, cheese and peanut butter, even as U.S. and Indian negotiators were discussing a deal to end the import taxes and return duty-free trade for many Indian exporters.

Perhaps the biggest blow came last June when India retaliated against a U.S. decision to revoke India’s designation under the Generalized System of Preferences (GSP). The program gave India tariff-free access to the U.S. market for about $5 billion worth of its products. India pushed tariffs up on almonds, walnuts, apples and pulses, all commodities that had been enjoying rising exports to the country over recent years.

The blow was especially hard for U.S. walnut growers, said Pam Graviet, senior marketing director for the California Walnut Commission.

“We see tremendous opportunity in India as Indian consumers are demanding more walnuts,” she said, pointing out that U.S. exports there had been rising for five years. “India was one of our fastest growing markets, but it was still a very young market. We’ve seen more than a 50% decline in shipments when we compare prior years to after the change in tariffs.”

Indian importers now pay a 120% tariff on in-shell walnuts from the U.S.

And Indian tariffs are particularly high for U.S. poultry. Three years after the U.S. won a legal battle in the World Trade Organization over India’s ban on U.S. poultry, trade is still blocked by steep duties.

Grassley said Tuesday he believes U.S. negotiators will be successful in getting at least some of India’s barriers removed in return for returning GSP rights to the country, but he stresses that he doesn’t believe it will be a big win.

A major focus of negotiators who continue to talk ahead of Trump’s visit to meet with Prime Minister Narendra Modi are focused on dairy, government and industry sources tell Agri-Pulse. India is the largest dairy-producing country in the world, and it also has the potential to be a major importer from the U.S., but most U.S. product is blocked by tariffs and non-tariff barriers.

When it comes to dairy, India says barriers to U.S. product are primarily based on “religious and cultural grounds” that insist products be derived from animals that have never consumed any feeds containing internal organs, blood meal, or tissues of ruminant origin, according to a USTR analysis. USTR calls the requirement onerous. The U.S. Dairy Export Council and National Milk Producers Federation say it’s unscientific.

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