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Trump scraps trade privilege for India

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Reuters
Reuters
Reuters is an international news organisation owned by Thomson Reuters

WASHINGTON/NEW DELHI: US President Donald Trump has announced a plan to end preferential trade treatment for India that allows duty-free entry for up to $5.6 billion worth of its exports to the United States.

“I am taking this step because, after intensive engagement between the United States and the government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India,” Trump told congressional leaders in a letter.

India is the world’s largest beneficiary of the Generalized System of Preferences (GSP), which dates from the 1970s, and ending its participation would be the strongest punitive action against it since Trump took office.

Reuters last month reported the planned U.S. action, which comes as the United States and China appear close to a deal to roll back U.S. tariffs on at least $200 billion worth of Chinese goods.

The US Trade Representative’s Office said India’s removal from the GSP would not take effect for at least 60 days after the notifications.

“Discussions are on with the United States, and given cordial and strong ties, (we are) keeping retaliatory tariffs out of it,” Commerce Secretary Anup Wadhawan said in New Delhi.

The preferential treatment brought India an annual “actual benefit” of just $190 million, he told reporters.

Of the 3,700 products covered, India used the concession for just 1,784, Wadhawan added.

“The benefit to industry is low, U.S. tariffs are already low,” said another government official, who spoke on condition of anonymity. “GSP is more symbolic of the strategic relationship, not in value terms.”

Farm, marine and handicraft products are among India’s exports most likely to be hit, Ajay Sahai, the director general of the Federation of Indian Export Organisations, told Reuters, but Indian shares were little changed on the news.

Last week, India delayed until April 1 higher tariffs on some US imports announced in response to a US refusal to exempt it from new steel and aluminum tariffs.

India’s top GSP exports to the United States in 2017 included motor vehicle parts, ferro alloys, precious metal jewelry, building stone, insulated cables and wires, said business grouping the Confederation of Indian Industry.

“Some industries which are highly export-oriented to the American markets would be impacted, like pharma or textiles,” said Siddharth Sedani, equity advisory head at brokerage Anand Rathi.

India’s falling trade deficit with the United States is estimated to have narrowed by more than $4 billion in 2018, the trade ministry said, adding it would fall further on growing demand for energy and civilian aircraft.

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