Two months after the United States announced its intention to “terminate” India’s designation as a beneficiary of its Generalised System of Preferences (GSP), the Trump administration has said it will not go back on its decision and has termed the GSP trade programme suspension a “done deal”. The 60-day notice period ended on May 3. A formal notification is now expected anytime.
The GSP, which is the largest and oldest US trade preference programme, allows duty-free entry for over 3,000 products from designated beneficiary countries. India has been the biggest beneficiary of the GSP regime, and accounted for over a quarter of the goods that got duty-free access into the US in 2017.
Hours after Narendra Modi was sworn in as Prime Minister for a second term, the Trump administration has prioritised working with New Delhi to ensure that US companies have a level playing field.
“The persistent market access issues, which we were engaged with our Indian counterparts over the last year, led us to announce in March that we would be suspending or withdrawing India’s benefits under the generalised system of Preferences Program,” PTI quoted a senior State Department official as saying.
“That suspension is a done deal. Now the task is how do we look ahead; how do we work under the second Modi Administration, to identify a path forward?” the official said, reflecting the Trump administration’s decision that the GSP termination is final.
On March 4, the move had come 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.
“We believe there’s enormous potential to grow our trade relationship and to help stimulate the jobs that Prime Minister Modi is committed to bringing to an overwhelmingly young Indian population. We believe that if India is prepared to address policies including data localisation and e-commerce measures, that served to stifle international investment from top tier companies, that we can continue to make significant progress moving forward,” the official said according to PTI.
“But I think we need to be looking forward at how do we relaunch an ambitious set of discussions between our trade teams in order to address these outstanding irritants,” the official said, asserting that there is every reason to believe that the GSP suspension will move forward. He also said that India needed to address some of its major concerns in particular those related to market access and data localisation.
“Data localisation is a phenomenon that’s been taking place globally where we’ve seen increasing digital protectionism. While we recognise that there are legitimate security and privacy and law enforcement issues related to data protection, we’re looking at nearly eight per cent of India’s GDP, about USD 160 billion is associated with IT firms who depend upon the free flow of data,” PTI quoted the official as saying.
So, the US does not want to see market access barriers to American firms in India when the Indian companies currently enjoy largely unfettered access to the US markets, the official said.