Trade wars: US scraps GSP sops, India still defers counter-move

By: | Published: November 2, 2018 3:23 AM

India has decided to defer its plan for a third time to retaliate against extra US duty on its steel and aluminium, even as the Trump administration on Thursday withdrew the benefit of concessional tariffs under its so-called generalised system of preference (GSP) for 50 Indian goods.

India has decided to defer its plan for a third time to retaliate against extra US duty on its steel and aluminium, even as the Trump administration on Thursday withdrew the benefit of concessional tariffs under its so-called generalised system of preference (GSP) for 50 Indian goods.

India has decided to defer its plan for a third time to retaliate against extra US duty on its steel and aluminium, even as the Trump administration on Thursday withdrew the benefit of concessional tariffs under its so-called generalised system of preference (GSP) for 50 Indian goods.
The imposition of extra tariff worth $235 million by India on 29 American goods will be delayed by 45 days from the November 2 deadline as India hopes to clinch a mutually-acceptable trade package from the ongoing negotiations, an official source told FE.
New Delhi takes heart from the fact that it still remains the biggest beneficiary of tariff concessions under GSP and that the US’ was not a country-specific move rather a product-specific one (as many as 94 items were dropped from the GSP list, impacting a number of nations).

The 50 now-ineligible items accounted for exports of only $72.4 million to the largest economy in 2017. Nevertheless, the move signals the Trump administration’s toughening stance in trade negotiations with India.
The source said India still remained the largest beneficiary of the GSP regime and the move was part of the usual tweaking it does once supplies of certain products to the US cross stipulated thresholds. The products that are now ineligible for tariff concession accounted for less than 2% of the country’s exports worth $5.58 billion to the US under the GSP regime and only a tiny fraction of India’s total goods exports of $45.2 billion in 2017. Still, since the 50 products include textiles, chemicals, dairy, leather, musical instruments, dried pigeon pea, processed fruit and vegetable, mango, carpets and musical instruments, the withdrawal of tariff benefits could hit some small and medium enterprises.

As part of the trade package, for which talks are on, while India wants an exemption from the additional duty on its steel and aluminium, the US is also seeking to use GSP benefits it offers to India and some others to extract greater market access from New Delhi and reduce a trade imbalance.
For India, greater access to the American market in food, farm, engineering goods, auto and auto parts segments hold promise in the long term (over five years). The US sees good prospects for its companies in Indian civil aviation, oil and gas, education service and agriculture segments. It is particularly interested in India removing price cap on bioresorbable stents. India is a large market for stent makers and it imported medical instruments, including stents, worth around $1.6 billion from the US in the last fiscal, up 10% from a year earlier.

The GSP, the largest and oldest US trade preference programme, is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.
Some of the items from other countries like Argentina, Brazil, Thailand, Suriname, Pakistan, Turkey, the Philippines, Ecuador and Indonesia have also been dropped from the GSP list.

The United States Trade Representative (USTR) in April announced that it is reviewing the GSP eligibility of India, along with Indonesia and Kazakhstan. According to the USTR, the total US imports under GSP in 2017 was $21.2 billion. India was the largest beneficiary, followed by Thailand ($4.2 billion) and Brazil ($2.5 billion). The programme has now been renewed through December 31, 2020.

Indian industry bodies like Ficci had submitted to the USTR that the termination of the GSP benefits would be contrary to the legislative objective and the history of the Trade Reform Act of 1974 of furthering the economic development of developing countries. However, it’s still unclear if withdrawal of the GSP benefit, which is the discretion of the US, can be successfully challenged at the World Trade Organization. But some analysts said India had challenged a similar rollback of a programme by the EU earlier.

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