GSP: India to ask US to delay removal of duty benefits

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Updated: March 28, 2019 6:30:33 AM

The package has been being negotiated for months now, as policymakers are busy campaigning for the general election at this juncture.

GSP, India, US, duty benefits, Washington, Indian exports, GSP benefit , trade margin policyThe package has been being negotiated for months now, as policymakers are busy campaigning for the general election at this juncture.

India will likely ask the US to delay by two months the implementation of the latter’s recent decision to withdraw duty benefits on annual Indian exports of $5.6 billion from May under the so-called Generalized System of Preferences (GSP), a source told FE. New Delhi could seek more time to firm up a final offer for Washington under a trade package.

The package has been being negotiated for months now, as policymakers are busy campaigning for the general election at this juncture. “The commerce ministry could write to the US Trade Representative to delay the withdrawal of the GSP benefits so that negotiations for a mutually-acceptable trade package can continue unhindered,” said the source.

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The US has indicated that it could review its decision on the GSP benefit withdrawal if India commits more to address American concerns, according to recent media reports from Washington. It had been using the GSP benefits as a leverage to extract greater market access, among others, from New Delhi under the trade package.

Prior to the US move on the GSP this month, as part of its offer for the trade package, India had proposed to replace its extant price cap regime for coronary stents with a trade margin policy to ease concerns of American manufacturers like Abbott Laboratories and Boston Scientific Corp. As for the US demand to scrap/cut tariff on ICT products, including mobile phones costing over Rs 10,000, New Delhi had conveyed to Washington that any such across-the-board cut would help only third parties (like China and Korea) and was willing to lower duties on those products where it would benefit the US. India had also offered to simplify certain certification procedures for dairy imports from the US.

However, Washington remained unimpressed and chose to announce the abolition of the GSP benefits in 60 days. For its part, hoping for a trade deal, India has delayed, time and again, the imposition of retaliatory tariff worth close to $235 million on 29 American products, in response to the Trump administration’s extra levy on supplies of steel and aluminium.

India’s offer to the US on the trade margin policy for coronary stents was similar to the one notified by it recently for 42 cancer drugs. Sources had earlier told FE that New Delhi was willing to allow up to 30% margin over the cost of stent production. In 2017, the Indian drug pricing regulator slashed prices of coronary stents by as much as 85% and slightly revised the rates last year.

The US is reportedly unhappy with India’s decision to tighten its FDI guidelines on e-commerce, which are expected to hit Amazon and Walmart-backed Flipkart. New Delhi wants the Trump administration to recognise that India is the only large economy whose goods trade surplus with the US has been shrinking (unlike China’s). According to the latest US government data, New Delhi’s trade surplus with Washington eased to $21.3 billion in 2018 from $22.9 billion in 2017. In contrast, China’s trade surplus with the US widened further to a record $419.2 billion last year from $375.6 billion in 2017, despite the tariff war between the top two economies.

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