The United States Tuesday has announced its intention to “terminate” India’s designation as a beneficiary of its Generalised System of Preferences (GSP) because it failed to provide assurances that it will give the US “equitable and reasonable” access to its markets in numerous sectors.
The move comes alongside a letter reportedly sent by US president Donald J Trump to the Speaker of the US House of Representatives stating his intent to terminate India’s position as a GSP beneficiary as New Delhi has not assured this equitable and reasonable access to its markets.
Under the United States GSP program, certain products can enter the United States duty-free if beneficiary developing countries meet the eligibility criteria established by its Congress.
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, said Indian commerce secretary Anup Wadhwan during a briefing on the development on Tuesday.
“GSP benefits are relatively limited…so any package worked out should be commensurate with this (the benefits India was deriving),” he said.
“At the direction of President Donald J. Trump, U.S. 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,” stated the office of the US Trade Representative in a media release.
“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,” it stated. “By statute, these changes may not take effect until at least 60 days after the notifications to Congress and the governments of India and Turkey, and will be enacted by a Presidential Proclamation,” it added.
According to Wadhwan, the Indian government had been engaged in discussions to arrive at 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,” he said, adding that, despite this, the US raised “additional requests” on sectors like medical devices, dairy products and the IT that India could not agree upon.
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. “We will not compromise on the issue of affordability (of medical devices like stents),” said Wadhwan.
Explained | Indian tariffs and Donald Trump’s anger
Around 1,900 products from India, including raw materials and intermediaries across sectors like organic chemicals, would be impacted if GSP is withdrawn, he said.
On the issue of 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.
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.
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 program depending on factors related to economic development, it added.