US To Terminate GSP Trade Preference for India

US To Terminate GSP Trade Preference for India

At President Donald Trump's direction, the US on Monday announced its intention to terminate preferential tariff systems for Turkey and India which are aimed at bolstering the trading prospects of developing nations.

Under the GSP program, "certain products" can enter the U.S. duty-free if countries meet eligibility criteria including "providing the United States with equitable and reasonable market access".

Turkey is no longer eligible to participate in the Generalized System of Preferences program because it "is sufficiently economically developed", USTR said in a news release. India failed to "provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors".

Meanwhile, Trump said that he will continue to monitor if India is "providing equitable and reasonable access to its markets" and meet the GSP eligibility criteria. Trade ties between the USA and India have suffered because of India's new e-commerce rules that hampered business for US internet retail giants such as Amazon and Walmart-backed Flipkart.

Reuters reported that the move by Washington was the most punitive measure taken against India since Trump took office. In terms of why India was dropped from the GSP list, the statement added, "The US launched an eligibility review of India's compliance with the GSP market access criterion in April 2018".

In a statement given to reporters, U.S. Trade Representative (USTR) Robert Lighthizer stated the reasons for India's termination of GSP status.

Given the ongoing situation at trade front, "I do not think any knee-jerk reactions would be warranted" from India side, the secretary said.

The move affects just a fraction of India's trade flows, yet it comes weeks before India's national elections, and just as Prime Minister Narendra Modi's government is trumpeting its foreign policy prowess and military strength following a stand-off with Pakistan.

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"India is a very high-tariff nation".

India reportedly enjoys preferential tariff on exports worth of almost $ 5.6 billion under the GSP route out of the total exports of $48 billion in 2017-18.

The US demand for relaxation in norms for exports of medical devices and dairy products are non-negotiable to India. "In a few instances, specific United States requests were not found reasonable and doable at this time by the departments concerned, in light of public welfare concerns reflective of India's developing country status and its national interest", Wadhawan said. While pushing for the Reciprocal Trade Act in January, he brought up India's duty on American whiskey, which he said was 150 per cent and on Harley Davidson motorcycles that he asserted he had got reduced from 100 to 50 per cent.

It comes as the USA negotiates with China to resolve a damaging trade war. "All undue concessions should be done away with and (the pending) retaliatory tariffs should be announced soon", he added.

The U.S. move, announced at the same time as a halt on the same trade preferences for Turkey, could reignite dormant anti-American sentiment within India and is likely to fuel opposition critiques of India's ruling government, Pant said. The reckoning is that some day in the near future India would have had to grow out of the GSP regime (as China has done), which was devised on the 1970s to help poor developing world countries, and that day might well be now.

"Modi has claimed that his personal diplomacy with leaders like Trump has led to benefits for India", Mihir Sharma said.

India considerably capped the pricing of medical devices such as knee caps and stents a year ago, reducing it to as much as 60 per cent.