US To Terminate GSP Trade Preference for India

Posted March 07, 2019

The Indian and Turkish currencies barely skipped a beat after Donald Trump announced that he would end the countries' trade-preference status with the USA, with the rupee posting the biggest gain of any emerging-market currency so far this week.

The US government has notified its intent to remove India from its zero-import duty programme, the Generalised System of Preferences (GSP), after a 60-day notice, though India said on Tuesday the matter can be resolved amicably through discussions.

The actual benefit from preferential treatment is of $190 million since India used the concession for only 1,784 products out of 3,700 covered, he said.

Mukherjee said India disagrees over the market access issue, but has outgrown GSP. The Trump administration listed India among the countries with which the US runs a trade deficit, and asked the US Commerce Department to "identify every form of trade abuse and every non-reciprocal practice that contributes to the US trade deficit".

India's opposition could grab the opportunity to embarrass Prime Minister Narendra Modi just weeks before he seeks a second term.

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The agreement effectively exempts India, and many other nations, from tariffs on certain goods exported to the US. But the country has said it would look to press ahead with efforts to increase trade. India exported around $50 billion worth of goods to the United States in 2017.

But his own relationship with Trump has been limited, with their meetings less frequent than those of Chinese President Xi Jinping with Trump, for example.

Exporters remained convinced that while loss of benefits under the Generalized System of Preferences (GSP) scheme will squeeze margins and make competitiveness hard, the overall impact will be minimal on the domestic industry.

"It can become a political issue in an election year".

That followed a drive by New Delhi to force global card payments companies such as Mastercard Inc and Visa Inc to move their data to India and higher tariffs on electronic products and smartphones.

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Trade ties between India and the United States have been strained after New Delhi adopted new rules on e-commerce, preventing foreign retailers, U.S. giants such as Amazon and Flipkart owner Walmart, for selling goods online through their affiliated companies.

India was ready to address U.S. concerns regarding medical devices in principle, by putting in place a suitable trade margin approach in a reasonable time-frame to balance concerns about fair pricing for the consumers and adequate remuneration for the suppliers.

"That narrow price differential of pre-GSP and post-GSP - can other countries' exporters fill in that gap?" said Rossow. It is true that Indian custom duties have been going up bit by bit, and not just in retaliation to U.S. measures such as its steel tariffs imposed previous year, a hit-back over which India has dithered more than anything.

It said Turkey, after being designated a GSP beneficiary in 1975, has demonstrated a "higher level of economic development", meaning it can be "graduated" from the programme. However, as Trump pushes on with his reported intentions to provide preferential treatment to American businesses, he has made a decision to take both India and Turkey off the GSP list.

"Unfortunately, this decision conflicts with our mutual objective of reaching a bilateral trade volume of $75bn that had been announced by both governments".

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The change for India came after "intensive engagement" between New Delhi and Washington, Trump wrote in one letter, released by the White House.