Bilateral Trade Agreement (BTA) between India and the U.S.
India and the U.S. agreed to negotiate the first stage of a multi-sector BTA by fall 2025.
The details of the BTA are unclear, but it’s not labeled as a free trade agreement (FTA), which would have different legal implications.
Both countries are members of the World Trade Organization (WTO), meaning the BTA must comply with WTO rules.
Legal Implications Under WTO Law
WTO’s most favoured nation (MFN) principle prohibits preferential trade between countries unless it aligns with specific conditions.
FTAs must cover "substantially all trade" to comply with WTO rules, meaning both India and the U.S. would have to eliminate trade barriers on most of their products for the BTA to be legally valid.
If India and the U.S. reduce tariffs only on selected products, without extending the same treatment to others, it would violate WTO law.
Possible Legal Routes: Interim Agreement or Enabling Clause
India and the U.S. could consider an "interim agreement" to pave the way for an eventual FTA, as allowed under Article XXIV of GATT, which provides a timeline for completing the FTA within 10 years.
The "enabling clause" of WTO law allows preferential trade agreements for developing countries, but the BTA may not qualify under this since it could provide better market access for U.S. products, not India’s.
Challenges to Upholding WTO Principles
U.S. President Trump’s approach to "reciprocal tariffs" could undermine WTO’s core principles of MFN and special treatment for developing countries like India.
India needs to ensure the BTA respects WTO rules and does not succumb to pressures that could weaken the rule-based international trade order.
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