February 13, 2020 / 6:23 PM / 2 months ago

India offers to import U.S. dairy, chicken legs to seal elusive trade deal with Trump

NEW DELHI/WASHINGTON, Feb 13 (Reuters) - India has offered to partially open up its poultry and dairy markets to win a limited trade deal during U.S. President Donald Trump's first official visit to the country this month, people familiar with the protracted talks say.

India, the world's largest milk-producing nation, has traditionally restricted dairy imports to protect the livelihoods of 80 million rural households involved in the industry.

But Prime Minister Narendra Modi is trying to pull all the stops for the U.S. president's Feb. 24-25 visit, aimed at rebuilding bonds between the world's largest democracies. In 2019, Trump suspended India's special trade designation that dated back to 1970s, after Modi put price caps on medical devices, such as cardiac stents and knee implants, and introduced new data localization requirements and e-commerce restrictions.

Trump's trip to India has raised hopes that he would restore some of the country's U.S. trade preferences, in exchange for tariff reductions and other concessions.

The United States is India's second-largest trade partner after China, and bilateral goods and services trade climbed to a record $142.6 billion in 2018. The United States had a $23.2 billion goods trade deficit in 2019 with India, its 9th largest trading partner in goods.

India has offered to allow imports of U.S. chicken legs, turkey and produce such as blueberries and cherries, Indian government sources said, and has offered to cut tariffs on chicken legs from 100% to 25%. U.S. negotiators want that tariff cut to 10%.

The Modi government is also offering to open up India's dairy market, but with quotas and a 5% tariff on some products, the sources said. Dairy imports will need a certificate they are not derived from animals that have consumed feeds that include internal organs, blood meal or tissues of ruminants.

New Delhi has also agreed to lower 50% tariffs on very large motorcycles made by Harley-Davidson, a tax that was a particular irritant for Trump. The change would be largely symbolic because few such motorcycles are sold in India.

Trump will be feted in Modi's home state of Gujarat, then hold talks in New Delhi and attend a reception that the hosts have promised will be bigger than the one organized for former president Barack Obama in 2015.

Trump has called India the "tariff king." The country has an average tariff rate of 17.% compared with 3.4% for the United States, according to World Trade Organization data.

U.S. Trade Representative Robert Lighthizer held telephone conversations with India Commerce Minister Piyush Goyal this week about a trade agreement, and signs are positive.

"As of now it looks like there will be a deal. All indications are we are closing in," said a source briefed on the talks.

A USTR spokesman and India's trade ministry did not respond to requests for comment.

PRIVACY LAW COMPLICATIONS

An Indian parliament panel is reviewing a draft data privacy law that imposes stringent controls over cross-border data flows and gives the government powers to seek user data from companies.

It is not clear whether it will be passed, or in what form, but the possibilities have unnerved here U.S. companies and could raise compliance requirements for Google, Amazon.com Inc, and Facebook.

The draft law is not part of the trade discussions, Indian officials say, because the issue is too difficult to resolve at the same time.

"The privacy and localization piece will be raised independently and in concert with the trade discussions," said a Washington-based source with knowledge of the U.S. administration's thinking.

Trump on Tuesday was non-committal about sealing a trade deal before his visit. "If we can make the right deal, we'll do it," he told reporters.

Two U.S. sources said progress had been made on proposed alterations to the medical device price caps. India's new import tariffs on medical devices, walnuts, toys, electronics and other products on Feb. 1 surprised U.S. negotiators, however. .

The new tariffs were aimed at China, which also makes medical devices, according to an Indian government source. "We have to protect our market and our companies," the source said.

Reporting by Sanjeev Miglani, Neha Dasgupta and Aditya Kalra in New Delhi, and David Lawder in Washington; Additional reporting by Rupam Nair in Mumbai; Editing by Heather Timmons and Daniel Wallis

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