US may hold move to withdraw GSP till new India govt takes over

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Published: May 8, 2019 5:31:02 AM

Ross, who is on a visit to India, echoed President Donald Trump’s charge of India being a “tariff king”. “India’s average applied tariff rate of 13.8%, and that remains the highest of any major world economy.

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The US has indicated that it could hold its proposed withdrawal of incentives on annual Indian exports of $5.6 billion under the so-called generalised system of preference (GSP) until the formation of the new government here, a source told FE. The rollback of the export incentives worth $190 million a year was to kick in from around mid-May. Analysts said the US move was aimed at giving New Delhi more time to sweeten its offers under an elusive trade package that both the sides had been negotiating for a long time.

US commerce secretary Wilbur Ross on Tuesday asked India to remove both tariff and non-tariff barriers for American companies and eliminate data localisation restrictions that “weaken data security and increase the cost of doing business”. Ross, who is on a visit to India, echoed President Donald Trump’s charge of India being a “tariff king”. “India’s average applied tariff rate of 13.8%, and that remains the highest of any major world economy. The very highest,” Ross said here at an event of the Trade Winds Forum and Trade Mission. He claimed that India imposed a 60% tariff on automobiles, 50% on motorcycles and 150% on alcoholic beverages. Its bound tariff rates (the highest rate it can charge under the WTO framework) on farm products averaged 113.5%, with some as high as 300%, he added.

India’s import duty on ICT products such as network routers and switches and parts of cellular phones are as high as 20%, while the US rate for these same products is zero. “These are not justified percentages. They are way too high,” he rued. Without mentioning the new FDI rules in e-commerce, notified by New Delhi, that have caused unease among American companies such as Amazon and Walmart, Ross said: “…currently, US businesses face significant market access barriers in India. These include both tariff and non-tariff barriers, as well as multiple practices and regulations that disadvantage foreign companies”.

Countering the US allegation, analysts here have said even the US imposes very high import duties on several products, including 350% on tobacco and 164% on peanuts. Even countries like Japan impose up to a 736% duty on select products and Korea up to 807%. Importantly, India’s average tariff of 13.8% is much lower than the average bound rate of 48.5% it is allowed to charge under the WTO framework. Developing countries, as such, require better tariff protection than the developed ones, and the WTO acknowledged this need as well, they added.

As for the claim of high Indian tariff on farm items, a paper submitted by India, China and some others at the WTO points out that the domestic support per farmer in the US was $60,586 in 2016, a massive 267 times of India’s ($227). Huge subsidies have led to huge competitive advantage of farm products of developed countries in the global market, which has forced developing ones (like India) to offer limited tariff protection to their farmers from the onslaught of heavily-subsidised imports.

Ross also sought greater trade balance, arguing that while the US is India’s largest importer of goods and services, Washington is only the 13th largest exporter to New Delhi.

While the secretary acknowledged that US’ exports of goods to India last year jumped by $7.4 billion, or an impressive 29%, to $33 billion, New Delhi’s exports to Washington, too, rose 12% to $54 billion, representing a trade deficit in goods of $21 billion. For its part, India wants the US to acknowledge that it was one of the few countries (unlike China) with which Washington’s trade deficit actually shrank for a second straight year in 2018. Also, India remains the world’s fastest-growing major economy, which will continue to generate enormous
opportunities for American businesses.

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