Trump plans to end India's preferential trade treatment

Trump plans to end India's preferential trade treatment

Congress establishes the conditions of eligibility for GSP, which include "providing the USA with equitable and reasonable market access, protecting workers' rights and combating child labour".

With Donald Trump determined to end what he calls "unfair" trade practices by United States allies, the move is set to become the strongest punitive action against India so far. "But this is on hold now", the official said. According to CNN, India was the biggest beneficiary of the program in 2017. India has also been removed from the list which provides tariff-free entry for some goods.

India's top GSP exports to the United States in 2017 included motor vehicle parts, ferro alloys, precious metal jewellery, building stone, insulated cables and wires, said business grouping the Confederation of Indian Industry, which had lobbied against the withdrawal. This is something the Modi government can not afford as it heads for the crucial Lok Sabha elections over the next two months.

The move to drop preferential trade treatment for India has raised fears that Trump could be opening a new front in his trade wars.

According to ToI, at least 1,900 Indian products from various sectors, including chemicals and engineering, get duty free access to the U.S. market under the GSP.

Adding that the GSP benefits were "relatively moderate", Wadhawan added that the decision will not impact India's relations with the US.

Another government official requesting to not be named said that GSP is more symbolic to the strategic relationship, and not really in terms of the value.

Needling India on trade will have a "corrosive effect" on Modi's views of the US and fits a pattern of Trump's focus on narrow trade grievances at the expense of broader strategic concerns, according to John Blaxland, head of the Strategic and Defence Studies Centre at the Australian National University.

The US demand for relaxation in norms for exports of medical devices and dairy products are non-negotiable to India.

"The Trump Administration is certainly reacting to strong, anti-import measures by the Modi government: Higher customs duties, import substitution rules, and price controls. I hope this does not disrupt positive areas of cooperation, like defence".

Mukherjee said India disagrees over the market access issue, but has outgrown GSP. "In addition, Turkey has graduated from other developed countries' GSP programmes due to its increase in economic development or through reciprocal arrangements", he argued. Wadhawan argued that the GSP's actual benefit to the country was just $190 million.

As far as retaliatory tariffs on the USA were concerned, Wadhawan said i was a separate issue and the two countries had "deep-rooted relations".

Biswal added that the decision can still be delayed by discussions within the next two months.

He said it was primarily because the economy of Turkey had improved a lot in the last four-and-a-half decades.

The official cited earlier said the United States demanded reversal of the price caps on coronary stents and knee transplants immediately under a new trade margins regime, which India could not agree to, given the public interest involved at a time of impending general elections. But that may change now. We have not even been able to complete a bilateral investment treaty (BIT) after more than 10 years of trying, and a BIT would typically be the investment chapter of an FTA.

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