The US has not formally informed India that it is ending preferential benefits for $5.6 billion worth of Indian exports, a senior official said on Friday.
The US said in April it would review the eligibility of Indian products for preferential or dutyfree access to its market under the Generalized System of Preferences (GSP) programme, in response to petitions from its dairy industry and medical device industry. The issue is part of a trade package that the two countries are negotiating.
“We have not received any communication from them that they want to pull the plug on this programme. It is non-reciprocal, non-discriminatory and a unilateral prerogative of the US,” the senior official told ET after a Reuters report that Washington is considering withdrawal of zero tariffs for India ahead of US commerce secretary Wilbur Ross’ visit next week. The US trade representative was completing a review of India’s status as a GSP beneficiary and an announcement was expected over the next two weeks, Reuters said, citing unidentified sources.
The US withdrew duty benefits worth $75 million from Indian exports of certain musical instruments, leather, textiles, dairy and chemicals in November, based on import ceilings in the scheme to limit duty-free access. The US has foregone $190 million in revenue due to the preferential tariffs under GSP on Indian exports ranging between 1% and 6%.
Trade Deficit With US Narrowing
“This has been an ongoing issue and stems from their concern on the trade deficit, which has been declining,” the official said. The US goods trade deficit with India was $22.9 billion in 2017, a 6.1% decrease over 2016, according to the Office of the US Trade Representative.
India told the US earlier that the decision to review GSP eligibility was discriminatory, arbitrary and detrimental. US retail giant Walmart, too, had supported India’s position.
Apart from the US, countries including Canada, Australia and those in the EU offer tariff preferences under GSP to developing countries. Total US imports under GSP in 2017 were worth $21.2 billion.
India’s trade surplus with the US was $21.27 billion in 2017-18. In the April-November period of the current financial year, this gap was $10.5 billion in India’s favour.
India plans to reduce the gap with higher levels of energy and aircraft purchases. The trade deficit is expected to shrink by $6-7 billion and as and when aircraft deliveries happen, the commerce department expects another $4-5 billion reduction in the trade gap every year.
The trigger for the latest downturn in trade ties was India’s new rules on ecommerce, which came on top of moves to get global card payment companies to store their data locally and imposition of higher tariffs on electronic products and smartphones, according to Reuters. The official said India’s recently tightened norms for foreign direct investment in e-commerce, which impacted Amazon and Walmart adversely, are not being discussed in the context of ongoing trade issues.