Trump plans to scrap preferential trade status for India

by Ben Pena March 6, 2019, 0:38
Trump plans to scrap preferential trade status for India

U.S. President Donald Trump holds a bilateral meeting with India's Prime Minister Narendra Modi alongside the ASEAN Summit in Manila, Philippines November 13, 2017.

US President Donald Trump has planned to completely end India's preferential trade treatment under the Generalized System of Preferences (GSP), that could impact India's exports if it happens.

Under what is known as the Generalised System of Preferences or GSP, India enjoys duty-free entry for up to Dollars 5.6 billion worth of its exports to the United States.

In a series of tweets on Tuesday, Pekcan said the decision to remove Turkey from the Generalized System of Preferences (GSP) would also affect small- and medium-sized businesses in the United States, and added that Turkey would continue to work on increasing the volume of trade between the two countries.

The total India-US trade was $126.2 billion in 2017, with a $27.3 billion deficit for the US, according to the USTR.

It pointed out that Trump has threatened to impose 10 per cent punitive duties on U.S. travel goods imports from China and ending the GSP for India "means that not only will sourcing return from China, but American consumers will pay far higher prices for their travel goods". "In addition, Turkey has graduated from other developed countries' GSP programmes due to its increase in economic development or through reciprocal arrangements", he argued.

Trump's targetting of what he considers imbalanced trade relationships has sparked a trade war with Beijing that has dragged on for almost a year. United States services a majority of the Indian medical devices market and only recently domestic medical equipment makers have started to report higher sales after the price cap.

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.

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India is the world's biggest beneficiary of America's Generalized System of Preferences (GSP) program, which was launched in the 1970s to help poor and developing companies grow their economies by encouraging trade.

On Monday, U.S. Trade Representative Robert Lighthizer announced that India and Turkey would lose their GSP status within 60 days.

Another opposition came from the medical sector based on price controls on medical devices imposed by India. "Moving GSP imports from the docks to USA consumers, farmers, and manufacturers supports tens of thousands of jobs in the United States", added the USTR office. The new e-commerce rules are expected to have a significant impact on USA retail giants Amazon and Walmart.

The products most likely to be impacted by GSP benefits will include raw materials and intermediary goods across various sectors, including organic chemicals, he said.

Specifically, it said India had implemented trade barriers that have negatively impacted the United States, and it has not taken measures to fix it.

Speaking about India, Trump called it "a very high tariff nation" and accused the state of high tariffs: "When we send a motorcycle to India, it's a 100 percent tariff".

Alyssa Ayres, senior fellow at the Council on Foreign Relations, said: "The United States and India are so far apart on crucial trade matters that the question of an FTA would be a bridge too far".

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