The much-anticipated India-US trade deal has hit a roadblock due to a communication gap between the two nations' top leaders, according to US Commerce Secretary Howard Lutnick. In a recent interview on the All-In podcast with Chamath Palihapitiya, Lutnick provided insights into why the bilateral trade agreement has yet to materialise despite significant groundwork.

Communication Breakdown Stalls Progress

Lutnick explained that the deal's completion required direct communication between Prime Minister Narendra Modi and US President Donald Trump. "I set the deal up. But you had to have Modi call President Trump. India was uncomfortable with it. So Modi didn't call," Lutnick stated during the podcast interview.

The Commerce Secretary's comments suggest that the trade negotiations had reached a critical juncture where high-level political engagement was necessary to finalise the agreement. However, India's apparent reluctance to initiate this direct communication channel between the leaders created an impasse.

US Moves Forward with Alternative Partners

Following India's hesitation, the United States proceeded with its structured approach to trade negotiations, which Lutnick described as a "staircase structure on the rates." The US redirected its focus to other Asian markets, successfully advancing trade discussions with several countries:

This strategic pivot allowed the US to maintain momentum in its regional trade agenda while India remained on the sidelines.

India's Late Re-engagement

According to Lutnick, India attempted to re-enter negotiations after a three-week gap. However, the delay had consequences for the terms of engagement. The Commerce Secretary hinted that the negotiation rates had become "difficult" due to India's position in the revised sequence of trade discussions.

The timing of India's return to the negotiating table placed the country at a disadvantage, as the US had already moved forward with its systematic approach to regional trade agreements.

Expert Perspectives on Future Prospects

Foreign affairs expert Fareed Zakaria had previously indicated in an exclusive conversation with NDTV that an India-US trade deal remained possible. Zakaria emphasised that successful closure would depend on agreement between the "two strong leaders" from both nations, highlighting the importance of direct engagement between Modi and Trump.

The expert's assessment aligns with Lutnick's revelation about the critical role of leader-to-leader communication in finalising the trade agreement.

Implications for Bilateral Relations

The Commerce Secretary's disclosure provides rare insight into the behind-the-scenes dynamics of high-stakes international trade negotiations. It underscores how diplomatic protocols and communication preferences can significantly impact economic agreements between major economies.

The situation illustrates the complex interplay between political relationships and trade policy, where personal interactions between leaders often determine the success or failure of substantial economic partnerships.

Source: https://www.ndtvprofit.com/world/india-us-trade-deal-isnt-done-because-us-commerce-secretary-explains-reason-involving-pm-modi

US Commerce Secretary Howard Lutnick has made striking claims about why a trade deal between the United States and India failed to materialize, attributing the breakdown to Prime Minister Narendra Modi's decision not to call President Donald Trump. The revelation came during Lutnick's appearance on the All-In Podcast, hosted by four Silicon Valley venture capitalists and entrepreneurs.

The Failed Communication

According to Lutnick, the trade negotiations had reached a critical juncture where a direct conversation between the two leaders was necessary to close the deal. "Let's be clear, it's his (Trump's) deal. He is the closer. He does it. It's all set up, you got to have Modi, call the President," Lutnick explained during the podcast interview.

The Commerce Secretary indicated that Indian officials were "uncomfortable" with arranging the call, leading to Modi ultimately not making contact with Trump. This hesitation proved costly for India's negotiating position.

Consequences of the Delay

The timing of India's reluctance had significant implications for the broader US trade strategy. Lutnick revealed that his team had been negotiating with multiple countries simultaneously, operating under the assumption that India would finalize its agreement first.

"We negotiated with them and assumed that India is going to be done before them and negotiated with them at a higher rate," Lutnick stated, referring to the other countries. When India failed to act, the US proceeded to announce deals with Indonesia, the Philippines, and Vietnam the following week.

India's Missed Opportunity

The delay created a problematic situation when India eventually expressed readiness to proceed. Lutnick described the awkward position this created: "So now the problem is, that the deals came out at a higher rate and then India claws back and says oh okay, we are ready. I said ready for what?!"

Approximately three weeks after the original deadline, Indian officials approached the US team about moving forward. However, Lutnick's response was pointed: "Are you ready for the train that left the station 3 weeks ago?" This exchange highlighted how the window of opportunity had closed.

Current Trade Situation

The failed negotiations have left India in a challenging position regarding trade with the United States. Currently, India's exports to the US attract a 50% tariff rate, reflecting the absence of a more favorable trade agreement that might have been achieved through successful negotiations.

Lutnick's comments provide insight into the high-stakes nature of international trade negotiations and the critical importance of timing and political communication in securing favorable terms. The revelation also underscores how diplomatic protocols and comfort levels with direct leader-to-leader communication can significantly impact economic outcomes between nations.