Donald Trump Plans To End India's Preferential Trade Treatment, Calls Country A 'High-Tariff Nation'

After supporting India in its bid to take counter-action against terrorism in the country, the United States plans to end preferential trade treatment for India that allows duty-free entry for $5.6 billion worth of the country¡¯s exports to the United States.

As the U.S federal elections are due to take place next year, President Donald Trump has decided to cut U.S trade deficits. Last week, he called India a ¡°very-high tariff¡± nation and told his supporters that he now wanted some kind of reciprocal tax.

In a letter to the congressional leaders, Trump wrote, ¡°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.¡±

On Saturday, in an address to the Conservative Political Action Conference (CPAC) in Washington DC he said, ¡°When we send a motorcycle to India, it¡¯s a hundred percent tariff. They charge 100 percent when India sends a motorcycle to us, we brilliantly charge them nothing.¡±

The Generalized System of Preferences (GSP) is a U.S. trade program designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories.

It was instituted on January 01, 1976 by the trade act of 1974. India is the world¡¯s largest beneficiary of the U.S GSP program and withdrawal of this treatment is expected to hurt India¡¯s trade revenues the most, since Trump assumed office in 2017.

Reuters reported that the U.S. Trade Representative¡¯s Office (USTR) said removing India from the Generalized System of Preferences (GSP) programme would not take effect for at least 60 days after the notifications, and would be done through a presidential proclamation.

This move comes after India made changes in its e-commerce rules to provide a level-playing field to Indian physical stores. It laid out rules for how e-commerce giants Amazon and Walmart-backed Flipkart carry out business in the country.

The e-commerce rules followed a drive by New Delhi to force global card payments companies such as Mastercard Inc and Visa Inc to move their data to India and higher tariffs on electronic products and smartphones.

According to the USTR, these new rules have affected the U.S commerce business seriously. It further added that India was unable to take successful steps to meet the GSP criterion. It was also reported that the Congress also plans to terminate the GSP beneficiary designation of Turkey.

Photo: Reuters

An Indian government source though, told Reuters India that the preferential treatment brings actual benefit of only $250 million a year to the country and they hoped that this withdrawal wouldn¡¯t lead to any trade hurdles.

¡°GSP is more symbolic of the strategic relationship, not in value terms,¡± the source was quoted as saying. However, it is not clear what action would India now take.

India¡¯s top GSP exports to the United States in 2017 included motor vehicle parts, ferro alloys, precious metal jewellery, building stone, insulated cables and wires, said business grouping the Confederation of Indian Industry, which had lobbied against the withdrawal of preferential treatment.

Certain countries can export products to the U.S duty-free if they meet the GSP eligibility criteria that include respecting arbitral awards in favour of 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 among others.