Trump to end preferential trade treatment for India

March 05, 2019 15:24
A file photo from November 2017 shows US President Donald Trump with Indian Prime Minister Narendra Modi. Trump is now moving to end special trade treatment for the South Asian nation. Photo: Reuters

US President Donald Trump announced plans Monday to end preferential trade treatment for India, accusing the South Asian nation of not providing fair market access for American companies. 

Under the plan, India will be removed from the Generalized System of Preferences (GSP), a program that allows duty-free entry for up to US$5.6 billion worth of Indian exports to the US. 

“I am taking this step because, after intensive engagement between the United States and the government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India,” Trump said in a letter to congressional leaders, Reuters reports.

India is the world’s largest beneficiary of the GSP program, which dates from the 1970s, and ending its participation would signal a strong punitive action for the nation.

Trump, who has vowed to cut US trade deficits, has repeatedly called out India for its high tariffs.

According to the Office of the US Trade Representative (USTR), removing India from the GSP program would not take effect for at least 60 days after the notifications, and would be done through a presidential proclamation.

Farm, marine and handicraft products are among India’s exports most likely to be hit by the move, Ajay Sahai, the director general of the Federation of Indian Export Organizations, told Reuters.

The Indian government, however, played down the impact of the move, saying it is keeping retaliatory tariffs out of its talks with the US.

The preferential trade treatment brings India an annual “actual benefit” of just US$190 million, Indian Commerce Secretary Anup Wadhawan said.

“Discussions are on with the United States, and given cordial and strong ties, (we are) keeping retaliatory tariffs out of it,” he added.

Of the 3,700 products it covers, India made use of the concession for just 1,784, Wadhawan told a news conference in New Delhi.

Countries not covered by the GSP face US tariffs of 2 percent and upwards.

Last week, India delayed until April 1 higher tariffs on some US imports announced earlier, in response to the Trump administration’s refusal to exempt it from new steel and aluminum tariffs.

Trade ties with the US suffered after India unveiled new rules on e-commerce limiting the way internet retail giants Amazon and Walmart-backed Flipkart do business, Reuters noted.

That followed a drive by New Delhi to force global card payments companies such as Mastercard and Visa to move their data to India and higher tariffs on electronic products and smartphones.

In 2017, the US protested against India’s decision to cap prices of medical devices, which upset American firms.

“India has implemented a wide array of trade barriers that create serious negative effects on United States commerce,” said the USTR, which estimates the United States ran a goods and services trade deficit of US$27.3 billion with India in 2017.

"Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion,” it added.

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