Trump ejects India from $5.6bn tariff deal over 'negative' trade barriers

Daniel Fowler
March 5, 2019

In a letter to the Speaker of the US House of Representatives, Nancy Pelosi, Trump said he was determined that New Delhi had "not assured" the United States that it would "provide equitable and reasonable access" to the markets of India.

India hopes the planned withdrawal by the United States of a preferential trade treatment to India would not lead to trade hurdles, an Indian government source said on Tuesday, adding that the "actual benefit" to India was only $250 million a year.

Mr. Wadhawan added that India was still in talks with the U.S. on the higher import duties that country charges on steel and aluminium, and said that India was still reviewing whether it would impose retaliatory tariffs or not.

At a hearing held by the USTR last June on withdrawing India's GSP, the minister in charge of commerce at the Indian Embassy in Washington, Puneet Roy Kundal, said that withdrawing the GSP benefits "would be discriminatory, arbitrary, and detrimental to the development, finance and trade needs of India, which is a vast and diverse developing country with unique challenges".

"I will continue to assess whether the Government of India is providing equitable and reasonable access to its markets, in accordance with the GSP eligibility criteria", Trump is reported to have said. "Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion".

US' trade preference programme, GSP, aims to promote economic development in beneficiary countries by removing duties on products. He had first brought up the matter soon after taking office, during his inaugural address to a joint sitting of the US Congress in 2017, without directly naming India.

"By statute, these changes may not take effect until at least 60 days after the notifications to Congress and the governments of India and Turkey, and will be enacted by a Presidential Proclamation", the USTR said.

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India is the world's largest beneficiary of the GSP program and ending its participation would be the strongest punitive action against India since Trump took office in 2017.

The decision comes as the USA is reported to be making headway in trade negotiations with China aimed mainly at cutting American trade deficits with a deal expected soon.

Farm, marine and handicraft products are among India's exports most likely to be hit by the move, Ajay Sahai, the director general of the Federation of Indian Export Organisations, told Reuters.

Trade ties with the USA were hurt after India unveiled new rules on e-commerce limiting the way internet retail giants Inc and Walmart Inc-backed Flipkart do business.

It said in August it was reviewing Turkey's eligibility in the program after Ankara imposed retaliatory tariffs on U.S. goods in response to American steel and aluminium tariffs.

The Trump Administration had launched an eligibility review of India's compliance with the GSP market access criterion in April 2018.

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