• Saturday, September 21, 2019
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US to scrap sops on $5.6 billion Indian exports


  • At the heart of the dispute was the US insistence that India should remove the price cap on knee implants and stents
  • New Delhi regulates stent as “essential medicine”, but it is a money-spinner for western companies
  • India declined saying it had commitments to make such medical devices affordable to the Indian patients

WASHINGTON/ NEW DELHI: American President Donald Trump on Monday notified the US Congress that he intends to terminate preferential trade terms to India within 60 days, apparently dissatisfied with concessions New Delhi made in response to his efforts to force open the Indian market.

India had sent formal proposals to the Trump administration agreeing to open up its agriculture, milk, and poultry markets in response to Washington’s warning that it will terminate the Generalized System of Preferences (GSP) — a program under which $5.6 billion of Indian exports to US enjoy zero tariffs — because of lack of reciprocal market access.

The offer did not cut any ice with Trump, who told US lawmakers in a letter that India “has not assured the United States that it will provide equitable and reasonable access” to its markets and he therefore intends to terminate the preferential treatment that India has enjoyed since 1976.

At the heart of the dispute was the US insistence that India should remove the price cap on knee implants and stents — which New Delhi now regulates as “essential medicine” but which is a money-spinner for western companies. India declined saying it had commitments to make such medical devices affordable to the Indian patients, but agreed to open up the Indian market for a wide variety of US farm produce – from cherries to chicken to milk products, which New Delhi had long resisted because of reservations over US farm practices.

On the US side there were concerns about India’s e-commerce and data localisation policies which New Delhi looks at as sovereign issues but Washington sees as putting a crimp on US companies

In the end Trump rejected the Indian offer as inadequate, surprising New Delhi, which saw him as a dealmaker who would appreciate the openings in the Indian agricultural market that would give him bragging rights in the boonies and Middle American farm country.

India is the world’s largest beneficiary of the GSP with nearly 2000 of its products worth $ 5.6 billion, approximately 12 per cent of its exports to the US, eligible for zero-tariff export. The products include motor vehicle parts, jewelry, handicrafts, carpets, marine produce and a range of raw materials such as granite (Aside: the Vietnam Memorial is built from granite imported from India).

But Indian officials maintain the GSP withdrawal will not be a crushing blow; exports will continue, except they will be subject to tariffs. The reckoning is that some day in the near future India would have had to grow out of the GSP regime (as China has done), which was devised on the 1970s to help poor developing world countries, and that day might well be now.

In fact, Trump despatched a separate letter to lawmakers at the same time as the India letter withdrawing GSP facility to Turkey, with the reasoning that it had reached an economic status that no longer merited preferential concessions.

Although Trump told US lawmakers in his letter that he will “continue to assess whether the government of India is providing equitable and reasonable access to its markets,” and the withdrawal will kick in only after 60 days through a presidential proclamation, there is little chance of any deal being salvaged in the two month window.

That’s mainly because India’s election code of conduct will kick in soon and the government will be hamstrung for the next two months in offering any more concessions.

Besides, New Delhi appears to have calculated that the tariff concession loss, estimated by commerce ministry officials at between $ 200 million to $ 250 million, is not something to lose sleep over. “We just have to take it on the chin and move on,” one official who spoke on background said.

On the geo-political front through, there is some surprise that Trump has put a hex on the so-called strategic ties with India by talking up trade issues with relatively modest financial outcomes – chump change in fact.

The Harley-Davison tariff issue that he raked up several times over the past year is worth a laughably small amount of money. But he made it symbolic of the trade fight he has picked up across the world.

Courtesy :indiatimes


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