US President Donald Trump to 'end' India’s preferential trade treatment

Trump plans to end India's preferential trade treatment

India's commerce ministry said Tuesday that it won't try to hold onto its preferential zero-tariffs status with the United States after Washington made a decision to drop it from its Generalized System of Preferences program.

According to Times of India (ToI), the commerce secretary said: "India exports goods worth $5.6 billion under the GSP and the duty benefit is only $190 million annually".

Trump has repeatedly promised to reduce USA trade deficits and protested against India's high tariffs.

Trump announced his decision on Monday, saying he wants to remove the countries from the Generalized System of Preferences, or GSP - which allows developing countries to send certain products to the United States duty-free. "Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion".

Trump's removal of trade concessions are not entirely unwarranted, coming after Indian customs duty hikes, expanded import substitution rules and domestic price caps, according to Richard Rossow, Wadhwani chair in U.S. -India policy studies at the Washington-based Center for Strategic and International Studies.

India is the largest beneficiary of the GSP exporting goods worth $5.6 billion to the USA under the programme. 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".

This reduction has happened in the face of a rising overall U.S. trade deficit, including with some other major economies. "The TPP was dismissed, just as trade links with India and Turkey now appear set to be discarded", he said. He said India now is looking at a non-GSP trade pact with America. The GSP programme provides additional benefits for products from least developed countries. Exports to the United States from India under GSP - at $5.58 billion - was over 12 per cent of India's total goods exports of $45.2 billion to the U.S. that year.

Sahai said the U.S. move, which would see tariffs of between 2-3 percent on the exempted goods, is most likely to hit leather, food processing, textile and few engineering goods. "In some cases, there were genuine cultural concerns like dairy products, where too we were trying to see how we could work with them".

While India announced retaliatory tariffs, they have not been enacted. The response comes after the United States government said it intends to end the preferential trade status granted to India. "In a few instances, specific U.S. 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.

The statement says the designation terminations were at the behest of Trump, who is now trying to stymie an ongoing trade war with China. The decision took place amid ongoing U.S. -India negotiations on New Delhi's GSP status.

Under an agreement taking shape, Beijing would lower some barriers on U.S. companies' operations in China and purchase large amounts American agricultural and energy goods if the United States lowered most of the tariffs in return.

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