Exports likely to be hit as US moves to end major trade benefits to India

India, having exported goods worth $5.6 billion to the US in 2017-18 through the scheme, is the largest beneficiary nation under the US' GSP scheme

Ending months of speculation, the Donald Trump administration has decided to cut benefits to Indian exporters under its Generalized System of Preferences (GSP) scheme.

"At the direction of President Donald J Trump, US Trade Representative Robert Lighthizer announced today that the United States intends to terminate India's and Turkey's designations as beneficiary developing countries under the GSP program because they no longer comply with the statutory eligibility criteria", the United States Trade Representatives office announced late on Monday.

India, having exported goods worth $5.6 billion to the US in 2017-18 under GSP, is the largest beneficiary of the scheme. The GSP is the largest and oldest US trade preference programme designed to promote economic development by allowing duty-free entry for thousands of products, mostly from developing nations.

While Turkey was also been removed from the GSP list on Monday, the USTR came down particularly hard on India. "India has implemented a wide array of trade barriers that create serious negative effects on United States commerce," it said.

A long time coming

Back in November last year, the US President had signed an executive order to end the duty-free status of 50 Indian exports to the US. These included inorganic and organic chemicals, agricultural products like cucumbers and gherkin, and certain types of animal hide. These were part of a global list of 90 items — from a large group of nations including Brazil, Argentina, Thailand, Egypt and Ecuador — for which prevailing rates of import tariff were to be be levied when imported into the US.

India's GSP eligibility had been under threat ever since it was clubbed with Indonesia and Kazakhstan to be scrutinised by a sub-committee under the USTR. The sub-committee came down heavily on New Delhi for continuing to take advantage of liberal trade policies while restricting market access for US goods.

According to an earlier World Trade Organization ruling, GSP benefits are non-reciprocal in nature. India had earlier threatened to drag the US to the World Trade Organization if benefits were withdrawn. "We will analyse the list of items and formulate a response quickly," a senior Commerce Department official said.