US seeks huge tariff concessions to restore trade benefits to India

To restore trade benefits to India, the United States is asking for concessions that are much higher than the benefits the country would forgo with the withdrawal of the generalised system of preferences (GSP), affecting potential negotiations between the two countries.

Sources said while revenues foregone by India would be $190-240 million a year, Washington is asking for tariff concessions in IT products amounting to $3.2 billion. GSP allows India to export some goods to the US at zero tariff.

Besides, the US is against New Delhi's move to put price cap on medical devices which currently have a market of $7 billion in India, they said. This market is expected to increase to $12 billion after Ayushman Bharat fully kicks in. In another two-three years, it is likely to grow to $20 billion. The US' market share in Indian medical devices industry is 50 per cent, they added.

Easing of norms in dairy products is another concession demanded by the US, they said.

In March, the US decided to end GSP from the first week of May. India had exported goods worth $5.6 billion in 2017-18 to the US under the scheme. The withdrawal of concessions would mean up to $240 million loss for India in terms of hike in tariffs.

Under GSP, there were nil duties on over a thousand of product lines including inorganic and organic chemicals, agricultural products like cucumbers and gherkin, and certain types of animal hide etc.

While India’s stand is that GSP was a non-reciprocal and non-discriminatory benefit extended by developed countries to developing countries, the US was particularly irked by tariffs and price control mechanism by India.

India has communicated its stand to the US on these matters. On tariffs on IT product, New Delhi said duties are moderate at 10-15 per cent and not import stopping. Had it been so, India would not have seen deluge of imports of high value smart phones, the sources said.

Also, India even today imports cent per cent of these IT products, especially if one counts the components used in the limited assembly that is happening.

Any duty reduction would have to be given to other countries as well which would benefit third countries, more than the US. This is so because India imports just $415 million from the US of the total $20 billion inbound shipment in these product lines, the sources said.

India is willing to address the US concern regarding price control in medical devices, they said. It is willing to put in place a suitable trade margin approach in a reasonable time frame. However, it has to keep affordability of these products for the customers in mind, they added.

India has a certification process in place to ensure that source animal is not fed with blood meal of another animal. It is not willing to negotiate this given the cultural and religious sentiments but is willing to simplify the process, the sources said adding the EU, Australia, New Zealand among other countries have no problems with India’s regulations.

• India has countered the charge of US President Donald Trump that India is "tariff king" that imposes huge duties on products like Harley-Davison against zero by Washington on motorcyles.
• Sources said tariffs can’t be compared on product to product basis, but on overall basis as every country has given its commitment to the World Trade Organisation (WTO) on specific products based on its necessities.
• US charges high tariffs on several items such as tobacco at 350 per cent, peanuts at 163.8 per cent, footwear at 48%, shoes at 32 per cent. Similarly, India charges high tariffs on some other products such as alcohol and wines at 150 per cent and motor cycles at 100 per cent, they said.