Indian
exports up to $5.6 billion could be hit as the US pressures India for greater
market access by declaring a review of the generalized system of preferences
(GSP) through which Indian exporters get preferential market access to the US.
The
GSP programme allows duty-free entry of 3,500 products from India, which
benefits exporters of textiles, engineering, gems and jewellery and chemical
products. The total US imports under GSP in 2017 was $21.2 billion, of which
India was the biggest beneficiary with $5.6 billion, followed by Thailand ($4.2
billion) and Brazil ($2.5 billion).
The
Trump administration has been accusing India of unfair trade practices and has
challenged most of its export subsidies at the World Trade Organization (WTO).
It has also not granted India an exemption on unilateral hike in steel and
aluminium tariffs, unlike to its other strategic allies. On Friday, the US
treasury department added India to the currency practices watch list saying New
Delhi increased its purchase of foreign exchange by $56 billion in 2017 which
does not appear necessary given its already robust foreign exchange reserves.
The
US Trade Representative (USTR) on Friday announced that it is reviewing the GSP
eligibility of India, along with Indonesia and Kazakhstan, based on concerns
about the countries’ compliance with the programme.
For
India, the GSP country eligibility review is based on concerns by the US dairy
industry and medical device industry alleging Indian trade barriers affecting
US exports in those sectors. India has very high import duties on dairy
products to protect its domestic industry. It has also recently put price
controls on medical devices like cardiovascular stents, drawing ire from big US
pharma companies.
“India
has implemented a wide array of trade barriers that create serious negative
effects on US commerce. The acceptance of these petitions and the GSP
self-initiated review will result in one overall review of India’s compliance
with the GSP market access criterion,” USTR said.
A
commerce ministry official speaking under condition of anonymity said though
India is worried about the move, it hopes a majority of US industries which get
cheaper intermediate products from India due to GSP benefits will support
continuation of the programme. “We hope it won’t be easy to withdraw GSP
benefits to India,” he added.
Abhijit
Das, head of the Centre for WTO Studies at the Indian Institute of Foreign
Trade, said given Trump’s tendency to take unilateral action, there could be
threat to India’s continuous access to GSP. Das said India should be ready to
drag the US to dispute settlement if US stops extending GSP to India on the
grounds that India is creating market access barriers to the US.
Though
GSP is a voluntary measure by the US and other developed countries, they need
to be guided by firm WTO principles, Das said. In 2003, India won a case
against the European Commission as the latter denied India GSP on textiles and
drugs, making such preferences conditional to countries combating drug
production and trafficking or protection of labour rights and environment.
However,
Ajay Sahai, director general and CEO of the Federation of Indian Export
Organizations, said India should not be too jittery about the announcement of a
GSP review. “It seems to be a posturing from the US, signalling India that it
should not join China in its disputes against the US on steel and aluminium as
it wants to bargain hard with China.”
“I
don’t think the US is reviewing its GSP policy. If on objective and transparent
criteria, India graduates on some products, that is still fine. In every GSP
review, we lose out on some products, as India becomes competitive and gains
greater market share,” he added.
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