By David Lawder and Neha Dasgupta
WASHINGTON/NEW DELHI, Sept 21 (Reuters) - The United Statesand India are racing to negotiate a limited trade deal that U.S.President Donald Trump and Indian Prime Minister Narendra Modican sign at the United Nations General Assembly in New York atthe end of September, people familiar with the talks said
A deal between the world's most populous democracies wouldbe a welcome victory for Trump, whose administration has madelittle headway negotiating an end to its prolonged trade warwith China. Trump is also expected to sign a deal with JapanesePrime Minister Shinzo Abe next week that lowers Japanese farmtariffs.
The deal under discussion with India would lower sometariffs on U.S. produce and restore preferential treatment forsome Indian exports to the United States, the sources said.
Trump and Modi will meet this Sunday in Houston at anIndian-American rally dubbed "Howdy Modi!" in a 50,000-seatstadium -- a sign of their warming relations, which arecontributing to expectations for a "mini-deal."
"There's a push to get something done with India, with aneye for UNGA," said a Washington-based source familiar with thediscussions.
Trump has demanded better terms of trade from most of thetop commercial partners of the United States, and blamesprevious deals for the loss of millions of U.S. manufacturingjobs.
U.S.-India trade relations have been fraught. Trump hasrepeatedly complained about India's high tariff rates, includinga 50% tariff on Harley-Davidson motorcycles.
The United States has also taken issue with India's newinvestment rules on e-commerce that limit how companies likeAmazon.com Inc and Walmart-backed Flipkart can dobusiness in a rapidly growing online market set to touch $200billion by 2027.
"We’ve been talking to the Americans, we have engaged themfor many months now," Indian Foreign Minister SubrahmanyamJaishankar said at a news conference this week. "My expectationis that some of the sharper edges, they would be addressed insome forms in the not too distant future."
A U.S. trade representative spokesman did not respond to arequest for comment on the U.S.-India talks.
Modi, like Trump, has used tariffs to try to boostinvestment in manufacturing, a key part of his "Make-In-India"campaign to attract foreign cash and create factory jobs formillions of youth entering the workforce.
Apple Inc supplier Foxconn recentlyexpanded production of iPhones in India to avoid a 20% importtariff and diversify its supply chain from China.
Bilateral U.S. trade with India, at $142 billion last year,is just a fraction of the $737 billion in U.S.-China trade.
TARIFFS
The United States in June ended duty-free access for about$5.7 billion worth of Indian exports under its GeneralizedSystem of Preferences (GSP) program, including chemicals,plastics, leather and rubber goods, and auto parts. India wasthe largest beneficiary of the GSP, which was designed to helpdeveloping countries that dates from the 1970s.
India responded with higher retaliatory tariffs on 28 U.S.products, including almonds, apples and walnuts.
India is the largest buyer of U.S. almonds, paying $543million for more than half of U.S. almond exports in 2018,according to the U.S. Department of Agriculture. It is thesecond largest buyer of U.S. apples.
PORK, DAIRY, NUTS
The talks are focused on U.S. demands that India reduceagricultural tariffs, including those for almonds, pork, dairyproducts, cherries, apples and other commodities, peoplefamiliar with the talks in both Washington and New Delhi said.
India is likely to allow some U.S. dairy imports, theofficial said. Another Indian official said the United Stateswas pushing India to remove high pricing barriers on importedU.S. medical devices including cardiac stents.
In return, India wants the GSP restored for a few moreyears, as Modi struggles to boost exports dampened by sluggishglobal demand made worse by the U.S.-China trade war. New Delhialso wants market access for some of its farm products such asgrapes to export to the United States.
The United States is also seeking lower tariffs on high-endelectronics products, one of the Indian officials said.
Both sides are discussing revising India's domestic contentrules on ethanol to allow more imports of the U.S. fueladditive, two U.S. sources familiar with the discussions said.
A narrow deal would be a positive first step and leavethorny issues aside such as the new e-commerce rules, said RogerMurry, deputy director of the Alliance for Fair Trade withIndia, a group of U.S. trade associations.
"We're hopeful that the Houston events can be bolstered bysome real progress on the trade front that shows the U.S. andIndia can negotiate some reasonable solutions," Murry said.(Reporting by David Lawder in Washington and Neha Dasgupta inNew DelhiAdditional reporting by Chris Prentice in New York and SanjeevMiglani in New Delhi)