Trump plans to scrap preferential trade status for India

Mar 06, 2019, 01:29
Trump plans to scrap preferential trade status for India

The United States has finally done the inevitable, as President Donald Trump has made it clear that his administration "intends" to withdraw preferential trade status, also known as the Generalised System of Preferences or GSP, from India.

Under the preferential tariff system, India exports to the United States goods worth approximately $5.6 billion annually duty-free.

President Trump says he wants to kick India and Turkey out of a program that gives the countries special trade treatment.

The US trade representative said it intends to terminate India's and Turkey's designations as beneficiary developing countries under the GSP programme because they no longer comply with the statutory eligibility criteria.

The Office of the United States Trade Representative said in a statement on Monday that Trump and Trade Representative Robert Lighthizer had stripped India and Turkey of their preferred trade status because they were no longer eligible.

Last year India retaliated against U.S. tariff hikes on steel and aluminium by raising import duties on a range of goods.

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India is the largest beneficiary of the GSP exporting goods worth $5.6 billion to the U.S. under the programme. All the issues in the trade domain are on the table for discussions.

The statement also said that Turkey, after being designated a GSP beneficiary in 1975, has meanwhile demonstrated a "higher level of economic development", meaning that it can be "graduated" from the program.

"This decision contradicts our mutual objective of reaching bilateral trade volume of $75 billion".

The decision reflects a failure for the two sides to come to agreement on various trade issues, but is not one India will try to fight, said Monideepa M. Mukherjee, a spokeswoman for India's commerce ministry.

The package, according to the official, was already in the process of being worked out, as the USA had made it clear to the Modi government that it would be withdrawing GSP benefits. India's total exports were worth $76.7 billion and the end to GSP affects only a small part of it limited to $5.6 billion.

Most of the exports were intermediate goods not produced in the USA because they were low in the manufacturing value chain, it added.

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Last week, India delayed higher tariffs on some USA imports until April 1, in response to the Trump administration's refusal to exempt it from new steel and aluminium tariffs.

India has concerns related to "genuine cultural sensitivities", specifically for dairy products because of animal feed being used for cows in the US.

The statement says the designation terminations were at the behest of Trump, who is now trying to stymie an ongoing trade war with China.

Removing India from the preferential tariff system will take effect 60 days following the notification.

The American Apparel and Footwear Association said in a written testimony that if GSP benefits are withdrawn for India as well as Indonesia and Thailand, "companies will have no choice but to return to sourcing from China".

Under what is known as the Generalised System of Preferences or GSP, India enjoys duty-free entry for up to Dollars 5.6 billion worth of its exports to the United States.

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"Evidently, all the flexibility we showed did not meet their requirements", the official added.