Washington: The United States announced that it was terminating its special market access policy to India under the generalised system of preferences (GSP) programme from June 5. “I have determined that India has not assured the US that it will provide equitable and reasonable access to its markets,” Trump said in a statement. In an otherwise guarded response, the Indian government said it had sought to resolve some of trade irritants but it was “unfortunate” they were not accepted by the US.
“In any relationship, in particular in the area of economic ties, there are ongoing issues which get resolved mutually from time to time. We view this issue as a part of this regular process and will continue to build on our strong ties with the US, both economic and people-to-people. We are confident the two nations will continue to work together intensively for further growing these ties in a mutually beneficial manner,” India's commerce department said. Exporters, however, said that the impact of the action may not be significant.
“Out of $6.35 billion exports under the GSP scheme, net benefit was only to the tune of $260 million... thus at macro level the impact of GSP withdrawal on our exports to the US would be minimal. However, in respect of products having GSP benefits of 3% or more, exporters may find it difficult to absorb the GSP loss,” said FIEO president Ganesh Kumar Gupta, adding that it may give an edge to Chinese goods.
Conceived by Washington in 1974 to help 120 developing countries and territories advance their economy and markets, the GSP regime saw India become one of the biggest beneficiaries, most recently accounting for nearly a quarter of the goods that got duty-free access to the US. That concession is now over as President Trump bears down on what he believes are American handouts to countries that are now trending towards middle-income or developed status, with some of them being “ungrateful” to boot.
Trump has complained repeatedly that India is a “very very high tariff nation”, highlighting in particular New Delhi’s taxes against high-end Harley-Davidson motorcycles (even after the taxes were cut in half), even though the amount involved is paltry in the overall scheme of things. Washington and New Delhi have been scrapping over trade for several years now, but whereas previous administrations pressed their case with a combination of international litigation (mainly before the World Trade Organisation) and bilateral, behind-thescenes coaxing and cajoling, Trump has adopted a more hardball, take-no-prisoners approach.
In fact, the US president announced imposition of graduated tariffs on neighbouring Mexico - overriding the arguments of his own advisers, including his son-in-law Jared Kushner - because of what he said is Mexico’s unhelpful attitude in stanching the flow of illegal migrants across the southern borders.
While the sums involved in the US-India spat are relatively modest (the US trade deficit with India is less than $25 billion compared to the $420 billion with China and even the $75 billion with Mexico), the GSP withdrawal casts a shadow over what are widely touted as strategic ties aimed at countering China.
