US President Donald Trump has chose to end Washington's preferential trade treatment for India that allows a duty exemption on more than $5 billion (€4.4 billion) worth of its goods coming into the United States. But it is the timing of the move that will test India's leverage with the Trump administration.
Trump has repeatedly called out India for its high tariffs, and USA trade officials said scrapping the concessions would take at least 60 days after notifications to Congress and the Indian government. While those negotiations helped drag implied volatility for emerging-market currencies to the lowest since April, strategists at Rabobank including Richard McGuire and Lyn Graham-Taylor say they may also have triggered the latest comments from Trump.
The measure can take effect sixty days after Congress and the Indian government have been notified of the USA decision.
Mr Trump would require a presidential proclamation to enshrine the move in U.S. law.
It may be recalled here that the United States had launched an eligibility review of India's compliance with the GSP market access criterion in April 2018. Delhi will, however, continue its talks with Washington to sort out mutual concerns, he added. "We would like to see that we can reach an agreement", the official said.
The Indian Commerce Secretary reportedly said benefits of the exemptions were "minimal and moderate", adding up to about $190 million on exports of $5.6 billion.
As far as retaliatory tariffs on the United States were concerned, Wadhawan said i was a separate issue and the two countries had "deep-rooted relations".
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India will not fight the US on the Generalized System of Preferences removal.
HT reported on February 12 about the impending action by USTR. While exporters would be able to absorb the duty loss wherever it is in the range of 2-3 per cent, we need to provide fiscal support to those products where GSP tariff advantage was significant. There were a number of areas [in which] we were willing to bring USA products into the Indian market. The review was mainly motivated by complaints from domestic US constituencies in the dairy and medical device sectors-both of whom claimed they faced barriers to market access in India.
"Ours is not a systemic problem", the Ministry of External Affairs official said. India has also been removed from the list which provides tariff-free entry for some goods.
"There too, we were willing to see how we could arrive at a mutually acceptable arrangement which preserved our cultural sensitivities and allowed dairy products from the U.S. to come into the markets", the official said. "Like in medical devices, we will not compromise on the affordability and needs of public health", Wadhawan said. It is true that Indian custom duties have been going up bit by bit, and not just in retaliation to USA measures such as its steel tariffs imposed a year ago, a hit-back over which India has dithered more than anything. India was agreeable to a very meaningful mutually acceptable package on the above lines to be agreed to at this time, while keeping remaining issues under discussion in the future, said the statement.
Mukherjee said India has outgrown its GSP status, although she did dispute Trump's assertion that India is not providing the US with reasonable market access.
"We had worked out a meaningful package that covered the USA concerns but they made additional requests which were not acceptable at this time", he added.