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Tuesday, January 25, 2022

India out of select US trade list, says minimal impact

These changes may not take effect until at least 60 days after the notifications are sent to the US Congress and the Indian government, and will be enacted by a Presidential Proclamation.

Written by Prabha Raghavan | New Delhi |
Updated: March 6, 2019 6:48:41 am
India out of select US trade list, says minimal impact Modi, Trump at ASEAN meet in Manila in 2017. (File)

The United States Tuesday announced its intention to “terminate” India’s designation as a beneficiary of its Generalised System of Preferences (GSP) duty concession programme, saying it had failed to provide assurances that it will give the US “equitable and reasonable” access to its markets in numerous sectors.

Under the programme, certain products can enter the US duty-free if beneficiary developing countries meet the eligibility criteria established by its Congress.

EXPLAINED | What is GSP, and how did India gain from being on US trade preference list?

Around 1,900 products from India, including raw materials and intermediaries across sectors such as organic chemicals and engineering goods, could be impacted if the GSP benefits are withdrawn, according to India’s Commerce Ministry. Exports in other categories like articles of iron or steel, furniture, aluminum and electrical machinery and parts could also be impacted.

These changes may not take effect until at least 60 days after the notifications are sent to the US Congress and the Indian government, and will be enacted by a Presidential Proclamation.

India said the withdrawal of benefits, if it were to happen, would have a “minimal” impact and that the government had been engaged in discussions to arrive at a “balance” on the issues raised by the US, including “additional requests” raised by Washington on sectors such as medical devices, dairy products and the IT sector that India has not agreed upon.

READ | US to ‘terminate’ India’s designation as GSP beneficiary; no significant impact on exports, says Delhi

This includes concerns raised by the US following India’s decision in 2017 to cap prices of cardiac stents, slashing their maximum retail prices over 70% in a move that impacted US stent giants Abbott, Medtronic and Boston Scientific.

“The GSP benefits are relatively limited and to that extent, any understanding that is reached would need to keep that in mind. Whatever package is worked out (with the US) needs to be commensurate with that value,” said Indian commerce secretary Anup Wadhwan. He said the US move is expected to have minimal impact on India, as exporters here were deriving duty free benefits of only $190 million of the total $5.6 billion-worth of GSP items traded.

The US Trade Representative (USTR) said: “At the direction of President Donald J. Trump, US Trade Representative Robert Lighthizer announced today that the United States intends to terminate India’s and Turkey’s designations as beneficiary developing countries under the Generalized System of Preferences (GSP) program because they no longer comply with the statutory eligibility criteria….India’s termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors.”

According to Wadhwan, the Indian government had attempted to achieve a “balance” on the issues raised by the US, while protecting the welfare of its citizens. “We were able to work out an extensive and reasonable package that covered all US concerns… We will not compromise on the issue of affordability (of medical devices like stents),” he said.

EXPLAINED | What the US trade rap means

On implementing retaliatory tariffs on products like steel, he said the government would continue to engage in “internal” discussions. “The door for discussions (with the US) is always open,” he added.

According to Sachin Chaturvedi, Director General at the Research and Information System for Developing Countries, the US decision will have “limited” impact on India. “I think these are tactics to pressurise India for FTA (Free Trade Agreement). Time has come when India should not delay anymore and impose tariffs which were postponed in November in those 29 products,” he told The Indian Express.

“The pace at which the economy is growing and diversifying its market in Latin America and Africa, it is likely to overcome withdrawal of such concessions…Our trade within South-South Cooperation is expanding at a very competitive pace,” he added.

At the same time, former Indian ambassador to the UK and trade expert Jaimini Bhagwati said the move will have a negative impact, if India’s competition is considered. “This will have a negative impact depending on who are India’s competitors in the US market for about the $5.5 billion or so worth of products that India exports to the US under reduced GSP tariffs. The amount of price advantage India has versus competitor countries and what happens to their GSP privileges will determine the extent to which India’s exports will be impacted,” Bhagwati, who also worked in the World Bank, told The Indian Express.

The United States launched an eligibility review of India’s compliance with the GSP market access criterion in April 2018. “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,” stated the USTR statement.

Turkey’s termination follows a finding that it is “sufficiently economically developed” and should no longer benefit from preferential market access to the United States market. GSP criteria include, among others, respecting arbitral awards in favor of United States citizens or corporations, combating child labor, respecting internationally recognized worker rights, providing adequate and effective intellectual property protection, and providing the United States with equitable and reasonable market access, stated the USTR. Countries can also be graduated from the GSP programme depending on factors related to economic development, it added.

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