Under the Generalised System of Preference, India exports $5.6 billion dollar worth of goods to US duty free
US President Donald Trump has said he intends to end the preferential trade status granted to India asserting that New Delhi has failed to assure America of "equitable and reasonable" access to its markets, an announcement that could be seen as a major setback to bilateral trade ties.
Reacting to the development, Commerce Secretary Anup Wadhawan has said that GSP benefits are relatively modest and the government would continue to hold talks with USA. The US demand for relaxation in norms for exports of medical devices and dairy products are non-negotiable to India.
Under the Generalised System of Preference, India exports $5.6 billion dollar worth of goods to US duty free. This is a significant chunk of India's $48.6 billion exports to US. Different industries like jewellery, electric motors, textiles, motor vehicles parts etc are likely to be affected is India struck off GSP list.
Currently, US is India's second largest trade partner only next to China and New Delhi enjoys a trade surplus of around $ 22 billion, something US has taken a deem view of.
President Trump, who has vowed to reduce US trade deficits, has repeatedly called out India for its high tariffs.He has accused India of being a "high tariff nation" and threatened to impose "a reciprocal tax" to match the heavy duties that New Delhi imposes on goods imported from the United States. Explaining his decision, US President in a letter said,"India has not assured the United States that it will provide equitable and reasonable access to the markets of India. However,Trump kept a window open saying US would evaluate India's action in the next 60 days.
The U.S. Trade Representative's Office said removing India from the Generalized System of Preferences (GSP) program would not take effect for at least 60 days after notifications to Congress and the Indian government, and it will be enacted by a presidential proclamation. Earlier, Trump government had withdrawn 94 goods from the ambit of GSP.
In a separate statement, the US Trade Representative (USTR) said India's termination from GSP followed its failure to provide the US with assurances that it would provide equitable and reasonable access to its markets in numerous sectors.
India's commerce secretary Anup Wadhawan has played down the development. He has said that the impact of India being out of GSP will be very modest. He said," Our relations remain strong with USA and discussions will go on . Our assessment is that this will not have any significant impact on our 5.6 billion dollar exports to the US."
The actual value of GSP benefit is around $190 million he said. Commerce secretary said,"GoI has to be conscious of our developmental and public welfare interests. Our effort was to balance the affordable prices of the medical devices without compromising on public welfare We will not compromise on affordability of medical devices."
With agency inputs
1. 'India can't compromise on affordability of medical devices'
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Anup Wadhawan said,"GoI has to be conscious of our developmental and public welfare interests. Our effort was to balance the affordable prices of the medical devices without compromising on public welfare". He said, "We will not compromise on affordability of medical devices."
Giving details of the talks, Commerce Secretary said that they were working with several concerned departments. He said that they had formulated a reasonable package for US but couldn't accommodate additional requests.
Government was very clear that the prices of medical devices wouldn't be hiked.
Wadhawan assured that government will internally review this issue and come with a solution
2. What is the Generalized System of Preferences?
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GSP program aims to help developing countries. India and Brazil are major beneficiaries. Close to 129 nations are currently part of the program according to USTR document.
It was introduced way back in 1976.
Under the United States GSP programme, certain products can enter the US duty-free if the beneficiary developing countries meet the eligibility criteria established by Congress.
The GSP criteria include, among others, respecting arbitral awards in favour of US citizens or corporations, combatting child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection and providing the US with equitable and reasonable market access.
Countries can also be graduated from the GSP programme, depending on factors related to economic development.
3. How is GSP different from normal trade
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GSP is preferential trade, where the country which is listed under the program will be able to export goods at zero or low tariff. It is essentially meant to give a leg-up to the developing countries.
Under normal trade laws, WTO partners are mandated to give equal preference to its trading partners.
4. Trade deficit with India a big point of concern for Trump
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The U.S. goods and services trade deficit with India was $27.3 billion in 2017, according to the U.S. Trade Representative's Office.India is the world's largest beneficiary of the GSP program and ending its participation would be the strongest punitive action against India since Trump took office in 2017.
India is currently USA's 11th largest importer of goods.
In a letter to Speaker of the US House of Representatives Nancy Pelosi, Trump said he was determined that New Delhi had "not assured" the US that it would "provide equitable and reasonable access" to the markets of India.
"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 the letter to congressional leaders on Monday.
"I will continue to assess whether the Government of India is providing equitable and reasonable access to its markets, in accordance with the Generalized System of Preferences (GSP) eligibility criteria," Trump said in his letter, a copy of which was released to the press.
5. E-commerce didn't feature in talks
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Contrary to speculations, e-commerce and hurdles regarding it were not part of the talks between two countries, confirmed Commerce Secretary.
U.S.-India trade ties were hurt after India unveiled new rules on e-commerce that restrict the way Amazon.com Inc and Walmart Inc-backed Flipkart do business.
