In the backdrop of the US putting India on its currency monitoring list and deciding to review India’s eligibility to enjoy duty-free access for certain products under a tax benefit scheme, the Union commerce minister Suresh Prabhu on Tuesday said that the central government is actively working with the US to resolve all trade issues.
“We have a special relation with the US, which is multi-faceted, multi dimensional and also very strategic. We are working with the US to address the trade issues,” Prabhu said in New Delhi. On April 13, the US Treasury department put India on a monitoring list for alleged currency manipulation. Five countries — China, Germany, Japan, Korea and Switzerland — were already on the list. The US move and the higher rise in March trade deficit created nervousness in the foreign exchange market on Monday, with the rupee falling 29 paise against the US dollar to close at 65.49, a more than six-month low.
Prabhu said that over four million Indians are living in the US and it is one of the major markets for goods and services exports. “In a situation like this, the US has taken certain unilateral actions. So we will follow the rules of WTO (World Trade Organization) as well as we will talk to them. We are completely in the control of situation,” he added.
Based on the market access concerns it has with India, the US on April 13 announced eligibility review of India for the duty-free access under the Generalized System of Preferences (GSP). The petitions filed by the US dairy industry and the US medical device industry requested a review of India’s GSP benefits, given “Indian trade barriers” affecting the US exports in those sectors. The acceptance of these petitions and the GSP self initiated review will result in one overall review of India’s compliance with the GSP market access criterion. Introduced in 1976, a wide range of industrial and agricultural products originating from certain developing countries are given preferential access — by removing import duties — to American markets under GSP. US Congress last month had voted to renew the GSP through 2020.
The US has dragged India to WTO’s dispute settlement mechanism challenging Indian export incentive schemes. Moreover, the decision of the US to impose duties on certain steel and aluminium products besides hiking tariffs against Chinese goods has triggered a global trade war, with China retaliating to the move with its own tariff hikes. On this issue of imposing high duties on steel and aluminium by the US, Prabhu said on Tuesday that India’s exports of these two commodities to America is not significant.
Prabhu said that the assistant US Trade Representative (USTR) was here last week and “we are in touch with the US at all levels”. US goods exports to India were $25.7 billion in 2017, increasing by 18.7 per cent compared to 2016. The corresponding US imports from India were $48.6 billion, up 5.6 per cent. The trade deficit between India and the US dropped by almost six per cent in 2017 compared to the previous year, the US Trade Representative (USTR) said in a report earlier this month. “I can assure you one thing that the only guiding principle for engagement with the US is to protect India’s commercial interest in its entirety,” Prabhu added on Tuesday.
On April 13, the US Treasury Department delivered to Congress the semi-annual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States Treasury, which found that six major trading partners warrant placement on the ‘Monitoring List’ for their currency practices. India is named as one of the six partners. The three pre-conditions for being named currency manipulator are: a trade surplus of over $20 billion with the US, a current account surplus of 3 per cent of the GDP, and persistent foreign exchange purchases of 2 per cent plus of the GDP over 12 months.