Washington/New Delhi: President Donald Trump has announced plans to scrap the preferential trade treatment for India, claiming that New Delhi has failed to assure the US of “equitable and reasonable” access to its markets, a move India said will not have a “significant impact” on its exports to America.
The move to end the Generalized System of Preferences (GSP) for India and Turkey is the latest push by the Trump administration to redress what it considers to be unfair trading relationships with other countries like China. Trump has pledged to reduce US trade deficits, and has repeatedly called out India for high tariffs.
On Monday, President Trump notified Congress in letters of his “intent to terminate” trade benefits for both countries under the GSP eligibility criteria. Under the United States GSP programme, nearly 2,000 products including auto components and textile materials can enter the US duty-free if the beneficiary developing countries meet the eligibility criteria established by Congress.
India was the largest beneficiary of the programme in 2017 with USD 5.7 billion in imports to the US given duty-free status and Turkey the fifth largest with USD 1.7 billion in covered imports, according to a Congressional Research Service report issued in January.
In a letter to Speaker of the US House of Representatives Nancy Pelosi, Trump said he was determined that New Delhi had “not assured” the US that it would “provide equitable and reasonable access” to the markets of India.
“I am taking this step because, after intensive engagement between the United States and the government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India,” Trump said.
“I will continue to assess whether the government of India is providing equitable and reasonable access to its markets, in accordance with the GSP eligibility criteria,” Trump said in his letter.
In New Delhi, commerce secretary Anup Wadhawan, while reacting to the US move, said India exports goods worth USD 5.6 billion under the GSP, and the duty benefit is only USD 190 million annually.
India mainly exports raw materials and intermediate goods such as organic chemicals to the US, he said. “GSP withdrawal will not have a significant impact on India’s exports to the US,” he told journalists.
He said “the benefits in absolute sense and a percentage of trade involved are very minimal and moderate”.
The US Trade Representative’s Office has said that removing India from the GSP programme would not take effect for at least 60 days after notifications to Congress and the Indian government, and it will be enacted by a presidential proclamation.
As many as 3,700 products get GSP benefits but India export only 1,900 items such as chemicals and engineering under that concession which was introduced in 1976 by America.
President Trump, who has vowed to reduce US trade deficits, has repeatedly called out India for its high tariffs. At a White House news conference October 1, Trump described India as a “tariff king”.