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Preferential trade treatment by USA to India no more?

With the trade war with China nearly coming to an end, US President Donald Trump seems to have found his new targets – India and Turkey.

Donald Trump, via a letter addressed to the US Congress, informed them about his intent to terminate the designation of India and Turkey as a beneficiary developing country under the “Generalised System of Preferences (GSP) Programme”.

The GSP Programme is a trade agreement which gives preferential treatment to India and allows certain Indian exports (which had a value of $ 5.6 billion in 2017-18) to enter the United States duty free. This scheme is the largest and oldest US trade preference programme designed to promote economic development by allowing duty free entry for thousands of products, from mostly developing nations. India is the largest beneficiary nation under this scheme and ending India’s participation would be the strongest punitive action the Trump administration would have taken against us since he took office.

Trump in the past has referred to himself as a “tariff man”, and the reason given by him in his letter to Congress to take such an action is that he claims, after intensive engagement with New Delhi, he determined that India has not assured the US that it will provide equitable and reasonable access to markets of India. In effect, Trump feels that India is not living up to its end of the bargain and has made repeated threats of imposing a reciprocal tax on Indian exports into the US. Just last Saturday, he accused India of being a high tariff nation, with specific reference to duties placed on Harley Davidson Motorcycles. In the meantime, India has deferred the imposition of higher duties on 29 key imports from the US an unprecedented six times since last year.

Co-incidentally or not, this announcement comes just as the US and China are close to a trade deal that could lift most or all of the US tariffs worth 200 billion $ on Chinese goods, thereby ending the trade war between the world’s two largest economies.

Trump has vowed to reduce the US trade deficit with nations that he feels the US has gone soft on in the past and has an unfair trade deal with. According to US Trade Representative’s Office, the US had a goods and services trade deficit of $ 27.3 billion with India in 2017.

 

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