US President Donald Trump. Photo: AP
New Delhi: The US government withdrew GSP (Generalized System of Preferences) benefits to India worth $70 million on as many as 50 items effective from Thursday, on a day the Indian government further deferred by 45 days tit-for-tat retaliatory tariffs against 29 American products to counter the US move to unilaterally raise import duties on Indian steel and aluminium products.
Indian officials said the withdrawal of benefits is part of the 94 products on which the US has revoked GSP benefits for all countries and is not a major portion of India’s $5.6 billion exports through duty-free entry of 1,937 products to the US under GSP.
“This will not affect the ongoing negotiations between the two countries for a trade package,” a commerce ministry official said under condition of anonymity.
US President Donald Trump issued a presidential proclamation on Tuesday, leading to the removal of these products from the privilege beginning 1 November. These are products that have gained competitiveness as their imports under GSP are more than 50% of the total import of the product by the US.
Trade relationships between India and the US have soured under the current US administration, with Trump unilaterally raising tariffs on steel and aluminium imports from India and challenging its export subsidy regime at the World Trade Organization (WTO). India has also dragged the US to the WTO on higher steel and aluminium tariffs and has threatened to impose retaliatory tariffs worth $240 million on US imports.
India on 20 June notified that it will raise tariffs on 29 US products, including almonds, apples and phosphoric acid, worth $10.6 billion imports in retaliation to the steel and aluminium tariff hikes by the US. India did not impose the tariffs immediately, unlike other major trading parters of the US as the two countries were engaged in bilateral negotiations to finalize a trade package. The duty hikes were to come into effect on 4 August, but India yet again deferred implementation by 45 days till 18 September. It had further extended the deadline by another 45 days to 2 November. On Thursday, the finance ministry deferred it till 17th December. The United States Trade Representative in April announced that it is reviewing the GSP eligibility of India, along with Indonesia and Kazakhstan, after the US dairy industry and the US medical device industry requested a review of India’s GSP benefits, given India’s alleged trade barriers affecting US exports in these sectors.
The Trump administration has been accusing India of unfair trade practices and has challenged most of its export subsidies at the WTO. It has also not granted India an exemption on unilateral hike in steel and aluminium tariffs, unlike to its other strategic allies.
On Friday, the US treasury department added India to the currency practices watch list saying New Delhi increased its purchase of foreign exchange by $56 billion in 2017 which does not appear necessary given its already robust foreign exchange reserves.