The President of United states (U.S.) – Donald Trump has threatened to end the preferential trade treatment granted to India, under the Generalised System of Preferences (GSP) Programme.
Under the GSP Programme, certain products are allowed to enter the U.S. market without any duty, provided the beneficiary developing country meets a set of criteria established by Congress. The criteria include providing intellectual property protection, and giving a reasonable and fair market access to the U.S.
Trump said that the move will help in reducing U.S. trade deficits. India was the largest beneficiary of the GSP Programme in 2017 with goods worth U.S. $ 5.7 billion entering the U.S. market. The move would impact more than 2,000 Indian products, including auto components, industrial valves and textile materials. If implemented, this could be a major setback for the India-U.S. bilateral relationship.
According to the data available with U.S. Trade Representative’s Office, the goods and services trade deficit with India was in tune of U.S. $ 27.3 billion in 2017. Earlier in April 2018, the U.S. had said that it will review India’s eligibility for the (GSP) Programme after some U.S. companies complained that dairy and medical devices shipments to India were being hurt by non-tariff barriers.
Writing a letter to congressional leaders, Trump mentioned, “I am taking this step because, after intensive engagement between the United States and the Government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India.”
The US Trade Representative’s Office has said, “India has implemented a wide array of trade barriers that create serious negative effects on United States commerce. Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion.”
However, removing India from the GSP Program would take place only after a notification of 60 days to the Congress and the Indian Government. Post that, it can be enacted by a Presidential proclamation.
Besides, as per the Department of Industrial Policy and Promotion’s (DIPP’s), revised FDI rules in India, online
retailers are not allowed to sell products from vendors in which they hold an equity. The Government also prohibited e-retailers from getting into exclusive sale agreement. The vendors cannot procure more than 25% of products from group companies of the same marketplace where they intend to sell them. This move severely impacted the business of U.S. based e-commerce retailers – Amazon and Walmart backed Flipkart.
Separately, Trump has also urged the Congress to remove Turkey form the GSP Program.
He wrote a letter to Congress, stating “Turkey is no longer developing country based on its level of economic development.”
For the records, Turkey was the 5th largest beneficiary in 2017, with goods worth U.S. $ 1.7 billion paving their way into U.S. market without any duty. Also, in the recent past, Trump has had several disagreements with Turkey’s leader, Recep Tayyip Erdogan.