By Ankit Panda
On Monday evening, U.S. President Donald J. Trump announced in a letter to the U.S. Congress that he had decided to end a favorable trade provision for India, along with Turkey. The decision refers to India’s status as a developing country under the Generalized System of Preferences (GSP) program. The U.S. decision is likely to affect as much as $5.6 billion in Indian goods.
In a letter to Congress, Trump notified U.S. lawmakers of his “intent to terminate the designation of India as a beneficiary developing country under the Generalized System of Preferences (GSP) program.” The measure can take effect sixty days after Congress and the Indian government have been notified of the U.S. decision.
“I am taking this step because, after intensive engagement between the United States and the Government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India,” Trump added. Turkey’s case was addressed in a separate letter.
In a statement given to reporters, U.S. Trade Representative (USTR) Robert Lighthizer stated the reasons for India’s termination of GSP status. India failed to “provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors.”
The U.S. decision follows a review process of India’s GSP status—alongside those of Indonesia and Kazakhstan—that the USTR’s office undertook in April 2018. The review was mainly motivated by complaints from domestic U.S. constituencies in the dairy and medical device sectors—both of whom claimed they faced barriers to market access in India.
In October 2018, the Trump administration announced the withdrawal of GSP benefits covering $70 million across 94 product categories. The decision took place amid ongoing U.S.-India negotiations on New Delhi’s GSP status.
Shortly following Trump’s election to the U.S. presidency, India was among the countries identified by the USTR as a cause for concern given the administration’s focus on U.S. trading partners who ran a deficit with the United States.
According to the USTR, in 2017, India was the United States’ ninth largest goods trading partner. In this category, however, India ran a $22.9 billion deficit that same year, meaning it exported more to the United States than it imported in American goods.
The services trade balance and deficit were both smaller. The U.S. services trade deficit stood at $4.4 billion in 2017.
“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 noted in his letter on India’s GSP status.
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