An India-U.S. trade agreement and the test of WTO laws, Pg 8

India-U.S. Bilateral Trade Agreement (BTA)

• India and the U.S. agreed to negotiate a multi-sector BTA by late 2025.
• The BTA is not labeled as a Free Trade Agreement (FTA) but must comply with WTO regulations.
• Unclear scope of the agreement as per the February 13, 2025, Joint Leaders Statement.

Legal Challenges under WTO Law

• WTO’s MFN Principle prohibits preferential treatment among trade partners unless under specific exceptions.
• FTAs must eliminate duties on “substantially all trade” between member countries.
• If India and the U.S. reduce tariffs selectively, without extending benefits to all WTO members, it would violate WTO rules.

Interim Agreements & Enabling Clause

• Article XXIV of GATT allows temporary “interim agreements” leading to an FTA.
• India-U.S. can use this approach only if they intend to finalize an FTA within 10 years.
• The WTO’s “enabling clause”, which supports preferential treatment for developing nations, cannot apply here since the U.S. also benefits from lower tariffs.

Respecting WTO Law & Global Trade Order

• U.S. policies of "reciprocal tariffs" violate WTO principles of MFN and Special & Differential Treatment (S&DT).
• India must uphold WTO rules and ensure compliance without undue pressure from the U.S..

Analysis & Way Forward

• India should push for rule-based trade agreements while ensuring no violation of WTO norms.
• Policy Recommendation: If an FTA is not the goal, India should avoid an “interim agreement” just to bypass WTO rules.

Mains Mock Question:

"Examine the challenges India faces in negotiating bilateral trade agreements while adhering to WTO norms. Suggest ways India can balance trade interests with global trade rules."