Washington: The Trump administration has said it is not going back on its decision to terminate India’s designation as a beneficiary developing nation under the key GSP trade programme, terming the suspension a “done deal”.
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.
On March 4, President Donald Trump announced that the US intended to terminate India’s designation as a beneficiary developing country under the GSP programme. The 60-day notice period ended on May 3. A formal notification is expected anytime.
The Trump administration has prioritised working with the Government of India to ensure that US companies have a level playing field, a senior State Department official told reporters on Thursday, hours after Narendra Modi was sworn in as Prime Minister for a second time following his spectacular electoral victory in the general elections.
“The persistent market access issues, which we were engaged with our Indian counterparts over the last year, led us to announce in March that we would be suspending or withdrawing India’s benefits under the generalised system of Preferences Program,” said the official who spoke on the condition of anonymity.
“That suspension is a done deal. Now the task is how do we look ahead; how do we work under the second Modi Administration, to identify a path forward?” the official said, reflecting the Trump administration’s decision that the GSP termination is final.
Under the GSP programme, nearly 2,000 products including auto components and textile materials can enter the US duty-free if the beneficiary developing countries meet the eligibility criteria established by Congress. India was the largest beneficiary of the program in 2017 with USD 5.7 billion in imports to the US given duty-free status and Turkey the fifth largest with USD 1.7 billion in covered imports, according to a Congressional Research Service report issued in January.
Noting that President Trump has already made the announcement regarding his decision to terminate the designation of India as a beneficiary nation under GSP, the official said there was a 60-day notification to Congress. The official said that does not rule out in the future, being able to achieve the reforms and the market access that the US needs under this programme to restore benefits.
So, the US does not want to see market access barriers to American firms in India when the Indian companies currently enjoy largely unfettered access to the US markets, the official said. These issues, as well as that surrounding e-commerce, will certainly be a topic of conversation with the Indians, the official said.
The senior State Department official said there has been significant growth in the bilateral trade relationship as well as a narrowing of the trade deficit. The bilateral trade is now at about USD 142 billion. US exports last year increased by 28 per cent. The trade deficits for goods and services stands at about USD 24 billion, which is about 11.9 per cent reduction.
At the same time, the official asserted that the tension remained between the two countries. “India remains one of the least open major economies in the world. The Trump administration is committed to ensuring free and fair and reciprocal trade. And we’ve prioritised working with the government of India to ensure that US companies have a level playing field,” the official said.