NEW DELHI: Within days of taking office, the Narendra Modi-led National Democratic Alliance government has got its first trade shock from the US, with US President Donald Trump officially removing India from the Generalised System of Preferences (GSP) —a trade programme that allowed New Delhi to export nearly 2,000 kinds of products to the US without paying customs duties.“I have determined that India has not assured the US that it will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019,” Trump said in a proclamation on Friday.
While Trump is known to walk the talk, India was hoping he would not execute his threat – originally made in March — to strip it off the GSP tag after New Delhi had offered resolution during bilateral trade talks. “We expected more negotiations,” said an official. Several members of the US Congress and US manufacturers, too, had urged Trump not to withdraw GSP benefits to India saying the move could increase input costs for American producers.
The commerce ministry termed the development ‘unfortunate’ and that it would work with the US to resolve the issues mutually. “India, like the US and other nations, shall always uphold its national interest in these matters” it said.Officials of the Piyush Goyal-headed ministry said India is likely to enter into fresh negotiations with the US rather than mulling retaliatory action.
Earlier, when the US unilaterally raised duties on certain steel and aluminium products, India had weighed retaliatory tariff on US exports in retaliation.Trade expert Biswajit Dhar, Professor, Jawaharlal Nehru University said: “We will have to re-negotiate and possibly agree to deeper tariff cuts allowing US farm and automobile exports into India. Trump needs a political and trade victory. He needs to show voters that he has won greater access to the world’s fastest growing markets – China and India.” While India’s merchandise exports to the US were worth $51.4 billion in 2018, some $6.35 billion was through GSP.
‘US sought deeper cuts than India could give’
Top commerce ministry officials said they had made offers of duty cuts on high-end automobiles, mobile phones and other high-value products the US is interested in, besides easing of rules to allow US agricultural products greater entry into the Indian market, during negotiations with the US team that had accompanied US Commerce Secretary Wilbur Ross on a trip to India in early May.
However, the Americans had “sought deeper cuts, than we were willing to give,” said officials.
According to Ganesh Kumar Gupta, president, Federation of Indian Export Organisations (FIEO), the most affected Indian export sectors would include “imitation jewellery, leather goods, pharmaceuticals and surgical goods, and chemical and plastics, besides agriculture”.
FIEO also said the impact of GSP withdrawal would be felt on those goods where the duty was higher than 3 per cent. The exports organisation also calculated that though India exports goods worth $6.35 billion under the Generalised System of Preferences (GSP) scheme to the US, the net duty benefit it gets is worth about $260 million.
The US, which has the highest trade deficit in the world at a staggering $621 billion, has already slapped punitive duties on Chinese exports to force its biggest trade partner to open up more to US exports.
From India, Americans have been demanding deep cut in import duties for its exports of agriculture goods, dairy products, medical devices, IT and communication items, besides better protection of intellectual property and roll-back of rules, which will force telecom service providers to have servers exclusively in India.
Some respite
Last month, the US had taken India off a list of countries its Federal authorities suspected were manipulating currency values to gain unfair trade advantages. Though this was a technical issue, the US authorities had all along assured India that they would remove New Delhi from this list