Trump plans to end India's preferential trade treatment

05 March, 2019, 11:38 | Author: Erin Carter
  • Donald Trump Says He Plans To End India's Preferential Trade Treatment

Trump's decision comes at a hard time for India's prime minister, Narendra Modi.

Washington's Generalized System of Preferences (GSP) program allows $5.6 billion (€4.94 billion) worth of Indian exports to enter the United States duty free.

At President Donald Trump's direction, the US on Monday announced its intention to terminate preferential tariff systems for Turkey and India which are aimed at bolstering the trading prospects of developing nations.

The move against India and Turkey came as the U.S. and China seek to negotiate an exit from a costly trade war between the two countries that is part of the Trump administration's efforts to address what it views as inequitable commercial relationships with other states.

According to the U.S. Trade Representative's Office, the U.S. goods and services trade deficit with India was $27.3 billion in 2017.

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".

Reuters last month reported the planned usa action, which comes as the United States and China appear close to a deal that would roll back us tariffs on at least $200 billion worth of Chinese goods.

The statement also said that Turkey, after being designated a GSP beneficiary in 1975, has meanwhile demonstrated a "higher level of economic development", meaning that it can be "graduated" from the program.

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Farm, marine and handicraft products were among India's exports most likely to be hit by the move, Ajay Sahai, the director general of the Federation of Indian Export Organisations, told Reuters. The reckoning is that some day in the near future India would have had to grow out of the GSP regime (as China has done), which was devised on the 1970s to help poor developing world countries, and that day might well be now.

Last week, India delayed until April 1 higher tariffs on some US imports announced earlier, in response to the Trump administration's refusal to exempt it from new steel and aluminum tariffs.

"We had worked out a meaningful package that covered the US' concerns but they made additional requests which were not acceptable at this time", he added.

"The effect will be minimal at the least to moderate at the most on India's export to the US", said Anup Wadhawan, commerce secretary in the Indian ministry of commerce. The rules caused severe disruptions for Amazon and Flipkart, which is majority-owned by the United States retail giant Walmart.

The e-commerce rules followed a drive by New Delhi to force global card payments companies such as Mastercard and Visa to move their data to India and higher tariffs on electronic products and smartphones.

"India has implemented a wide array of trade barriers that create serious negative effects on United States commerce. Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion", the USTR said.

"Our proposal couldn't be workable for United States as India couldn't have compromised on affordability of medical devices", he said.

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