Trump wants to terminate trade benefits for India
On Monday, in a letter to Congress, President of United States Donald Trump wrote he intended to end trade benefits for India. Trump argued the Government of India failed to "provide equitable and reasonable access to the markets of India." Apart from India, Trump wants to end trade benefits for Turkey as well, as it isn't a "developing economy" anymore.
Understanding how India benefited from the program
India is listed under Generalized System of Preferences (GSP) program which allows goods to enter the States duty-free. Nearly 2,000 export products, including auto components, industrial valves, and textile material, get easy access to markets. In 2017, items worth $5.7 billion were given duty-free status. Notably, the US Trade Representative's Office claims US goods and services trade deficit with India was $27.3 billion in 2017.
USTR and Trump have several complaints with India
The US had in April 2018, said it would review India's listing in GSP program. The USTR said, "India has implemented a wide array of trade barriers that create serious negative effects on United States commerce." It added India failed to take steps to "meet GSP criterion" despite "intensive engagement". To recall, Trump had called India "tariff king" in October last year.
What are the criteria and who decides them?
The criteria for program, which largely benefits developing countries, is established by Congress. Beneficiaries are expected to respect arbitral awards in favor of US citizens, curtail child labor, respect worker rights, provide protection to intellectual property, and give the States equitable and reasonable market access.
How did India become the "tariff king"?
India's trade ties with the US took a setback after New Delhi changed its e-commerce rules that negatively affected Amazon and Flipkart, which is backed by Walmart. As per the new rules, global card companies like Mastercard Inc and Visa Inc were asked to move their data to India. A higher tariff imposed on electronic products and smartphones further worsened the ties.
PM Modi has a lot on his plate
The turn of events doesn't look good for India. However, the decision will take at least 60 days before it is implemented through a presidential proclamation. Trump's decision comes at a time when Prime Minister Narendra Modi is staring at crucial general elections. Not only this, India's long-standing animosity with Pakistan escalated into violent clashes last week pushing both countries on an edge.
