Thursday, June 24, 2021

India, The US And Generalised System Of Preferences

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US President Donald Trump announced in a letter to the U.S. Congress that he had decided to end a favourable trade provision for India, along with Turkey. The decision refers to India’s status as a developing country under the Generalized System of Preferences (GSP) program. The GSP, the largest and oldest US trade preference programme, is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries. India has been one of the biggest beneficiaries of the GSP regime and accounted for over a quarter of the goods that got duty-free access into the US.

Tensions in trade relations between India and the US have grown over the past year as the US decided to increase import tariffs on steel and aluminium, and also review India’s eligibility for GSP benefits. Under the GSP review the two countries held talks to address the areas of concern. The decision to review India’s eligibility for the GSP comes as a result of the American medical and diary industries’ complaints that India is not providing equal market access to American products. The decision to end the GSP programme for India came just days after President Trump remarks at the Conservative Political Action Conference in Washington DC. He stated that “India is a very high-tariff nation. They charge us a lot. When we send a motorcycle to India, its 100 percent tariff. They charge 100 percent. When India sends a motorcycle to us, we brilliantly charge them nothing.” He has called for reciprocal tax. In the past also, Mr. Trump had stated that India charges high tariffs for US goods while the US does not do the same.

It should be noted that Mr. Donald Trump got elected to the US Presidency on his stand on promoting American business. His policy of “America first, buy American goods” etc. was meant to create more American jobs and export US made goods to foreign countries, so that the sluggish American economy could grow. He has been successful on these fronts. However, there have been instances when American economic policy in the very recent past, has veered towards protectionism. This is quite ambivalent in the modern age of international trade. India as a major growing economy; thus has to take care of her own economic interests.

According to India’s Commerce Secretary Anup Wadhawan, the American move comes despite the best efforts of India to hold meaningful dialogues and to explain India’s position on medical and dairy products. The Indian Commerce ministry also said that it had conveyed its willingness to provide market access to products like cherries and other food items originating from the US. On reduction of IT duties, India maintained that its duties are moderate and not ‘import stopping’. New Delhi has agreed to extend duty concessions on specific items in which there is a clear US interest. India is also willing to consider discussions for a Mutual Recognition Agreement on telecom testing. In accepting the decision of the US, the government of India has clarified that the economic value of GSP was moderate and is unlikely to impact India’s trade with the US. While the monetary value of the GSP is small for India, especially as India diversifies its market to African countries and Latin American nations, experts feel that it would be detrimental for small industries in India that may lose market share in the US.

Perhaps with this in mind the Indian government has stated that it will continue to talk with the US Commerce Department during the sixty day period after which the GSP decision is expected to come into effect. India has also stated that it will continue to negotiate with the US on all issues in the trade domain beyond the GSP to ensure channels of communication remain open.

Script: Dr.Stuti Banerjee , Strategic Analyst on American Affairs

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