Trump plans to end India's preferential trade treatment

Trump plans to end India's preferential trade treatment

File photo of USA president Donald Trump and Prime Minister Narendra Modi.

India had sent formal proposals to the Trump administration agreeing to open up its agriculture, milk, and poultry markets in response to Washington's warning that it will terminate the Generalized System of Preferences (GSP) - a program under which $5.6 billion of Indian exports to U.S. enjoy zero tariffs - because of lack of reciprocal market access.

The US Trade Representative office on Tuesday morning (IST) said that it had made a decision to withdraw the GSP status for India and Turkey at the direction of US President Donald Trump following India's "failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors". Announcing the termination, Trump said India had "not assured" the U.S. that it would "provide equitable and reasonable access" to its markets.

Trump has repeatedly promised to reduce United States trade deficits and protested against India's high tariffs.

The US goods and services trade deficit with India was $27.3 billion in 2017, according to the US Trade Representative's Office.

It pointed out that Trump has threatened to impose 10 per cent punitive duties on United States travel goods imports from China and ending the GSP for India "means that not only will sourcing return from China, but American consumers will pay far higher prices for their travel goods".

India's top GSP exports to the United States in 2017 included motor vehicle parts, ferro alloys, precious metal jewelry, building stone, insulated cables and wires, said business grouping the Confederation of Indian Industry, which had lobbied against the withdrawal.

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The latest move comes as USA is negotiating with China over Trump's trade concerns, including massive trade deficit.

"I will continue to assess whether the Government of India is providing equitable and reasonable access to its markets, in accordance with the Generalized System of Preferences (GSP) eligibility criteria", Trump said in his letter, a copy of which was released to the press. "The withdrawal will not have a significant impact on India's exports to the USA", he said, reported news agency PTI.

India has failed to provide assurances that it would allow required market access, while Turkey is "sufficiently economically developed" that it no longer qualifies, the statement read.

The Indian administration said that Washington's move will have a minimal to moderate impact on India's exports to the US.

The preferential trade treatment brought India an annual "actual benefit" of just $190 million, Commerce Secretary Anup Wadhawan said.

"Our assessment is there won't be significant impact on exports and, no significant edge to competitors", he said, adding that the tariffs that India imposes are "very consistent with World Trade Organization-bound rates".

Few of the items are produced in the United States as they are low in the manufacturing value chain, it added.

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