The United States on Friday officially ended India’s capability for a duty-free import scheme for developing countries after determining that it has not assured the US that it will provide “equitable and reasonable access to its markets.” to US companies as necessary under appropriate American trade laws. The Generalised System of Preference (GSP) is the biggest and oldest US trade preference programme and is designed to promote economic development by allowing duty free entry for thousands of products from designated beneficiary countries.
The upcoming discontinuation was previewed Thursday by a senior administration official, who described it as a “done deal” and said it is time for the two countries to move on, and try to resolve other trade irritants. The official had left the possibility of bringing back the advantage if India act in accordance with American demands for greater market opportunity to its dairy products and medical devices sectors. “I have determined that India has not assured the US that it will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019,” President Donald Trump said in an official announcement on Friday by ignoring the plea made by several top American lawmakers.
On March 4 President Donald Trump announced that the US plans to end India’s designations as a beneficiary developing country under the GSP programme. The 60 day notice period ended on May 3. A senior State Department official told reporters on Thursday, Hours after Prime Minister Narendra Modi was sworn in for a second time following his landmark victory in the general election. But the administration held off on the official announcement as India was in the middle of elections at the time and there was pressure from US lawmakers, from both parties to delay the discontinuation to allow more time for discussion to reach an agreement. There was assumptions that India could avoid the termination.
India was the largest beneficiary of the programme in 2017 with $5.7 billion in imports to the US given duty free status and Turkey the fifth largest with $1.7 billion in covered imports, according to a Congressional Research Service report issued in January. Under the GSP programme the products including auto components and textile materials can enter the US duty free if the beneficiary developing countries meet the eligibility criteria established by Congress. The Trump administration arrived at a judgement that India would not be able to deliver no matter how much extra time the administration was given. But it agreed to wait for the elections to get over, and announced the termination just a day after Prime Minister Narendra Modi began his second time. The Trump administration argues that New Delhi has failed to assure America that it will provide fair and impartial access to its markets in numerous sectors. This US activity that can be predicted for long, makes the first serious challenge for the Modi government in respect of relations with the United States, as the talk with the Trump’s administration might not stop this and could be considering even more sudden actions in line with President Donald Trump’s solid attitude on trade.
The GSP criteria includes respecting arbitral awards in favour of the US citizens or corporations, combating child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection, and providing the US with equitable and reasonable market access. In a statement Coalition for GSP executive director Dan Anthony said Mr Trump’s decision will cost American businesses over $300 million in additional tariffs every year. “Without GSP benefits American small businesses face a new tax that will mean job losses, cancelled investments and cost increases for consumers. Only a year after the Senate and House passed a three year reauthorisation of the GSP by a near unanimous margin, the Trump administration has kicked out the GSP country that saves American companies more money than any other” he said. India had said that the US government’s move to withdraw duty
Concessions on certain products under the GSP programme will not have a significant impact on exports to America as the benefits were only about $190 million annually.