In a major White House declaration, US President Donald Trump said the designation of India as a beneficiary developing country under a key trade preference programme is terminated, effective June 5, this year.
He said India has not assured the US that it will provide equitable and reasonable access to its markets.
“I have determined that India has not assured the US that it will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019,” Trump said in a proclamation on Friday, ignoring the plea made by several top American lawmakers as it will cost American businesses over $300 million in additional tariffs every year.
The decision could be seen as a major setback in India-US bilateral relationship, in particular in the arena of trade and economy.
The Generalized System of Preference (GSP) is the largest and oldest US trade preference programme and is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.
The GSP criteria include, among others, respecting arbitral awards in favour of US citizens or corporations, combating child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection and providing the US with equitable and reasonable market access.
Countries can also be graduated from the GSP programme, depending on factors related to economic development.
The Trump Administration had launched an eligibility review of India’s compliance with the GSP market access criterion in April 2018.
India was the largest beneficiary of the programme in 2017 with $5.7 billion in imports to the US given duty-free status, according to a Congressional Research Service report in January.
Arguing that New Delhi had failed to assure America that it would provide equitable and reasonable access to its markets in numerous sectors, US President Donald Trump had in March informed the US Congress about his intent to terminate the designation of India and Turkey as a beneficiary developing country under the Generalised System of Preferences (GSP) programme.
Reacting on Trump’s decision to withdraw India’s name from GSP program list, Commerce Secretary Anup Wadhawan had said that the move will not have any significant impact on India’s 5.6 billion dollar exports to the US.
Earlier on Wednesday, a US official had said that the decision to evict India from a key trade pact is a “done deal”.
The Ministry of External Affairs (MEA) sources had earlier said the government will continue to talk to the US during the 60-day period. They said that efforts were being made to find a reasonable package and said the problem was not systemic.
The decision to end India’s preferential trade status came even as several influential US lawmakers, including Democratic presidential aspirant Tulsi Gabbard urged the President to delay the termination.
The move could be seen as a major setback for the newly formed government under Prime Minister Narendra Modi.