US president Donald Trump Saturday announced that he is terminating India’s benefits under its trade scheme to provide preferential access to the US market starting June 5. The move follows nearly a month of uncertainty over whether the US would ease its stance on its trade relations with India, as it had earlier held off on finalising its decision close to the Lok Sabha elections.
“I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019,” stated Trump in a proclamation issued by the White House.
India has been a beneficiary of the programme, known as the Generalised System of Preferences (GSP), since November 1975.
The move could impact India’s competitiveness in exports of 1,900 items, including organic chemical raw materials, iron, steel, furniture, aluminum and electrical machinery, as duties will now be levied on these products.
However, the Indian commerce ministry earlier said the withdrawal would have a minimal impact, as the total duty reduction enjoyed by these exporters was only $190 million every year.
GSP beneficiary countries are allowed to export thousands of products to the US without paying duties.
Trade tensions Over the last two years, tensions with the US have been on the rise following certain decisions by India that the Trump administration claimed was preventing “equitable and reasonable access” to its markets. This includes India’s decision to slash maximum retail prices of life-saving cardiac stents and essential knee implants over 65 per cent and its demand that US dairy product exporters certify that their produce was derived from animals that were not fed food containing internal organs.
Despite months of negotiations, where India attempted to provide a “very meaningful way forward on almost all the US requests”, the Trump administration on March 5 announced that it planned to withdraw India’s status as a GSP beneficiary.
“In a few instances, specific US requests were not found reasonable and doable at this time by the departments concerned, in light of public welfare concerns reflective of India’s developing country status and its national interest,” stated the Indian commerce ministry following the US’ initial announcement in March.
However, the US had initially held off on notifying its decision despite the expiry of its 60-day notice period to do so early in May. Officials from the US administration had also indicated during visits last month that the Trump administration might be waiting for the end of the Indian general elections and the formation of the new government to take a final call on the withdrawal.