United States President Donald Trump on Monday said he will end India's preferential trade treatment under a programme that allows $5.6 billion, around Rs 397 crore, worth of Indian exports to enter the country duty-free, Reuters reported.
India was the largest beneficiary of the program in 2017 with $5.7 billion in imports to the US given duty-free status and Turkey the fifth largest with $1.7 billion in covered imports, according to a Congressional Research Service report issued in January. India now enjoys duty-free entry for upto $5.6 billion worth of its exports to the U.S., under what is known as the Generalised System of Preferences or GSP.
Ending India's participation would be Trump's strongest punitive action against New Delhi since he took office in 2017.
India's top GSP exports to the United States in 2017 included motor vehicle parts, ferro alloys, precious metal jewelry, building stone, insulated cables and wires, said business grouping the Confederation of Indian Industry, which had lobbied against the withdrawal.
The decision comes as the United States is reported to be making headway in trade negotiations with China aimed mainly at cutting American trade deficits with a deal expected soon. 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.
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In a separate letter, Trump also informed the Congress of his intent to terminate the GSP beneficiary designation of Turkey.
He said it was primarily because the economy of Turkey had improved a lot in the last four-and-a-half decades. "GSP is more symbolic of the strategic relationship, not in value terms".
The Indian administration said that Washington's move will have a minimal to moderate impact on India's exports to the US.
Reacting to the move, a top Indian trade official said New Delhi does not plan to impose retaliatory tariffs on USA goods. The rules caused severe disruptions for Amazon and Flipkart, which is majority-owned by the U.S. retail giant Walmart. 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 U.S. farm produce - from cherries to chicken to milk products, which New Delhi had long resisted because of reservations over USA farm practices. When we send a motorcycle to India, they charge 100 per cent tariff.
"India has implemented a wide array of trade barriers that create serious negative effects on United States commerce", the USTR said.
Meanwhile, Trump said that he will continue to monitor if India is "providing equitable and reasonable access to its markets" and meet the GSP eligibility criteria.