The United States has decided to end the preferential treatment given to India under the Generalised System of Preferences programme. US President Donald Trump has notified the US Congress that his government intends to terminate the duty-free terms of trade between India and the US under the GSP programme in two months’ time.
According to a press statement issued by the Office of the US Trade Representative, “At the direction of President Donald J Trump, US Trade Representative Robert Lighthizer announced that the United States intends to terminate India’s designations as beneficiary developing countries under the Generalized System of Preferences (GSP) program because they no longer comply with the statutory eligibility criteria.”
The statement added that India’s termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors.
“By statute, these changes may not take effect until at least 60 days after the notifications to Congress and the Government of India, and will be enacted by a Presidential Proclamation,” the statement read.
Background
Under the United States GSP programme, certain products can enter the United States duty-free if beneficiary developing countries meet the eligibility criteria established by Congress. GSP criteria include, among others, respecting arbitral awards in favour of United States citizens or corporations, combating child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection, and providing the United States with equitable and reasonable market access. Countries can also be graduated from the GSP programme depending on factors related to economic development.
India
The United States launched an eligibility review of India’s compliance with the GSP market access criterion in April 2018. India has implemented a wide array of trade barriers that create serious negative effects on United States commerce. Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion, said the press statement issued by the US government.
Anup Wadhwan, commerce secretary, Government of India, said in a statement here that the Indian government has been engaging in discussion with the US government to arrive on a balanced point of view on the issues raised by the US.
He stated that despite India’s extensive and reasonable package covering all US concern, the US raised issues related to medical devices, dairy products and IT which India could not agree upon.
Currently India-US trade stands at around US$5.6 billion under the GSP programme.
Commenting on the subject, Amit Lohani, convener, the Federation of Indian Food Importers (FIFI), stated that it would be ‘damaging’ for the Indo-US trade for the food industry.
He stated, “We as Forum of Indian Food Importers see this as a major announcement and we would not want to be ostrich by closing our eyes to this. The ongoing trade scrimmage and global trade outlook is without a doubt damaging situation for the entire food and beverage industry. We have seen the reduction it has caused to the industry since May last year and repercussions are continuing to be reflected. Products like almonds, walnuts, apples, pulses, and others were seen facing a decline in there inflow and getting out of consumers’ reach.”
Further, the industry body feels that if India decides to escalate the matter by imposing retaliatory tariffs on US goods than Indian food importers, particularly need to find out newer avenues globally.
“If India too decides to retaliate then industry may have to renegotiate their business deals and find either new suppliers or pass the cost burden to end-consumers. Few will gain and majority will lose that is why we as a chamber of commerce urge that both the countries governments to keep food products out of this environment. And that we should not deprive our end-consumers neither in India nor in the United States from a range of healthful products,” said Lohani.
FIFI was also noted saying, “We need to have an environment of stable trade and we urge both the countries to understand the power of stable and firm long-term trade relationships. This volatility will not take us long way and as said by many no one wins a trade war.”
It is pertinent to mention here that India imports agricultural products worth Rs 10,500 crore and exports worth Rs 20,600 crore.
Meanwhile, reacting to the news, Ganesh Kumar Gupta, president, Federation of Indian Export Organisation (FIEO) said that India’s exports to the US stood at US$50.57 billion in 2017 with a GSP tariff advantage of only US$190 million, which was less than 0.4% of Indian exports.
“Naturally, its withdrawal will have marginal impact. And GSP has been given on non-reciprocal basis yet US has linked it with market access and tariff reduction which is against the basic tenets of GSP,” he added.
FIEO study reveals that processed food; leather products (other than footwear); plastic products (vinyl floor covering, BOPP films, non-adhesive tape); building material & tiles; hand tools (spanners, wrenches, drilling equipments); engineering goods such as spark ignition, turbines and pipes, parts of generators, cycles; made-ups (pillow/cushion covers); woven women’s dresses were eligible for higher GSP benefits and therefore, it suggested that government should look into providing fiscal support to such sectors so that exporters reduce their export prices factoring the fiscal support with a view that the landed price of such products remain more or less what was under the GSP regime.
