US-India trade talks: Steer clear of deal-breakers
Although these are early days in the negotiations for a multi-sectoral bilateral trade agreement (BTA) between India and the US, the final outcome is already being envisaged as the ‘mother of all deals’ and a ‘grand trade deal.’ Both countries are expected to negotiate hard for finalizing an agreement that maximizes benefits for their respective stakeholders.
Apart from tariff-related issues, how the US addresses India’s concerns on agriculture and affordable access to medicines could ultimately determine the success or failure of these negotiations. What could be the non-tariff related demands of the US in these two areas and what are India’s sensitivities?
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US commerce secretary Howard Lutnick has articulated America’s demand that India must open up its agricultural sector to imports from the US. While this would involve issues related to tariffs and possibly import quotas, the US could also take forward its objective of seeking changes in India’s minimum support price (MSP) scheme, especially for rice.
The 2024 National Trade Estimate Report on Foreign Trade Barriers brought out by the United States Trade Representative (USTR) includes the following: “India’s excessive subsidization through market-price support has gone far beyond its domestic food security needs and has helped India secure its place as the top global exporter of rice, accounting for more than 40% of global rice exports in recent years.” This view has been echoed in a recent submission to the USTR on 11 March 2025 by the USA Rice Federation, an advocacy group for all segments of the US rice industry.
Both the National Trade Estimate Report and submission by the USA Rice Federation seek to ultimately dismantle the MSP scheme for rice under implementation by India. Further, the USA Rice Federation views this as an opportunity to increase American rice exports to developing countries by $54 million each year. This advocacy group has urged the Trump administration to “include the rice industry’s priorities in any comprehensive trade arrangements.”
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If the Trump administration yields to the interest of this lobby group and includes the issue of MSP in the BTA negotiations with India, it could become a potential deal-breaker. Given the crucial role played by India’s MSP scheme in meeting the food security needs of hundreds of millions of citizens who are poor and hungry, New Delhi would find it almost impossible to meet such US demands.
Turning to the issue of access to medicines, the US National Trade Estimate Report has highlighted the “restriction on patent-eligible subject matter in Section 3(d) of the Indian Patents Act and its impacts.” What is this issue? What are the commercial objectives being pursued by the US? And what could be the implications if India is required to comply with Washington’s demands on it in BTA negotiations?
Under the current rules of the Agreement on Trade-Related Aspects of Intellectual Property Rights at the World Trade Organization, generic versions of patented medicines can be introduced in the market only after their 20-year period of patent protection is over. As most generic medicines cost a fraction of the original patented product, timely availability of the former has become pivotal in making healthcare affordable for the poor and middle class in most countries.
To continue making large profits, manufacturers of patented medicines in the US have prevailed upon their government to negotiate provisions in trade agreements that delay the entry of generics to the market beyond the formulations’ 20-year patent period.
These stratagems, commonly referred to as ‘evergreening of patents,’ compel patients to pay exorbitantly high prices for patented drugs even beyond the original 20-year period of patent protection, after which generics ought to reach the market. Section 3(d) of the Indian Patents Act has been effective in slamming the brakes on some of these patent evergreening strategies, thereby facilitating the timely market entry of generics.
In addition to seeking changes in Section 3(d) of the Indian Patents Act, US manufacturers of patented medicines can be expected to make a strong pitch for the BTA to include other provisions that would in effect undermine India’s generic drug producers.
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Overall, a weakening of India’s generics industry will enhance the windfall profits of patent monopolies in the US, but also result in a surge in the cost of healthcare and burn a big hole in the pockets of the poor and sick in India. Further, some of the flagship initiatives of the central government, such as Jan Aushadhi Kendra and Ayushman Bharat, could be substantially undermined and rendered ineffective.
In conclusion, if the US gives primacy to patents over patients, it will result in a negotiating deadlock. As will be the case if it seeks to use BTA negotiations to undermine the food security needs of hundreds of millions of Indians just to add a few million dollars to its earnings from rice exports.
One can only hope that the US administration will display the requisite wisdom to desist from pushing these sensitive issues in BTA negotiations with India. If not, the vision of a ‘grand trade deal’ could quickly turn into a negotiating nightmare.
These are the author’s personal views.
The author is an expert on international trade issues.
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