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Withdrawal of U.S.'s Trade Concessions to India

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February 11, 2019

Why in news?

The U.S. could possibly remove India from the Generalised System of Preferences (GSP) list.

What is the Generalised System of Preferences?

  • The GSP is a U.S. trade program designed to promote economic growth in the developing world.
  • GSP was instituted in 1976 by the Trade Act of 1974.
  • It provides preferential duty-free entry for up to 4,800 products from more than 120 designated beneficiary countries and territories.
  • It was extended to India in 1976, under which India is able to export about 2,000 product lines to the U.S. under zero tariff.
  • The revocation of the GSP will have a significant impact on Indian exporters.

What is the U.S.'s rationale?

  • The proposal comes in a series of measures taken by the Trump administration against India to reduce U.S.'s trade deficit with India.
  • President Donald Trump is concerned with the “unequal tariffs” from India, as the trade relationship is in favour of India.
  • Notably, Indian exports to the U.S. in 2017-18 stood at $47.9 billion, while imports were $26.7 billion.
  • The U.S. has been imposing tariffs on several Indian products since March 2018.
  • The USTR (U.S. Trade Representative) also parallelly began a review of India’s GSP status.
  • This was after receiving complaints of trade barriers from India, from the dairy industry and manufacturers of medical devices.
  • India's decisions on data localisation for all companies operating in India and tightening norms for FDI in e-commerce have aggravated the situation.
  • Recently, the U.S. withdrew GSP status on at least 50 Indian products.

What was India's response?

  • In retaliation to US restrictions, India earlier proposed tariffs of about $235 million on 29 American goods.
  • But it has put off implementing these, five times in the past year, in the hope that a negotiated trade settlement will come through.
  • The latest deadline on implementation of the proposals expires on March 1, 2019.
  • Despite several rounds of talks between officials over the past few months, there is no breakthrough.
  • Besides, India has also attempted to address the trade deficit, with purchase of American oil, energy and aircraft.

What lies ahead?

  • Both sides should work towards calling a halt to trade hostilities and speed up efforts for a comprehensive trade “package”.
  • This would address the concerns of both sides much better than the measures to match each concern product by product.
  • India must be aware of the larger, global picture about U.S.-China trade war issues as well.
  • If a trade deal with the U.S. is reached, India could be the biggest beneficiary of business deals lost by China.

 

Source: The Hindu

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