U.S. to withdraw duty benefits on $5.6 billion exports from India

Donald Trump Says He Plans To End India's Preferential Trade Treatment

Trump's decision comes at a hard time for India's prime minister, Narendra Modi.

India had sent formal proposals to the Trump administration agreeing to open up its agriculture, milk, and poultry markets in response to Washington's warning that it will terminate the Generalized System of Preferences (GSP) - a program under which $5.6 billion of Indian exports to USA enjoy zero tariffs - because of lack of reciprocal market access.

India was the largest beneficiary of the program in 2017 with $5.7 billion in imports to the US given duty-free status and Turkey the fifth largest with $1.7 billion in covered imports, according to a Congressional Research Service report issued in January.

Washington announced on Tuesday its decision to pull the plug on the Generalized System of Preferences (GSP) scheme for India citing "its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors".

However, India is yet to take a call on extending the retaliatory tariffs or higher duties worth $235 million on 29 American goods beyond April 1 as it is a different issue, Wadhawan said. According to the US Trade Representative's Office, the US goods and services trade deficit with India was $27.3 billion in 2017.

With Donald Trump determined to end what he calls "unfair" trade practices by U.S. allies, the move is set to become the strongest punitive action against India so far.

It comes as the U.S. negotiates with China to resolve a damaging trade war.

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The statement also said that Turkey, after being designated a GSP beneficiary in 1975, has meanwhile demonstrated a "higher level of economic development", meaning that it can be "graduated" from the program.

"We don't agree that India is a high-tariff country", Mr Wadhawan said, countering the charge.

United States commerce secretary Wilbur Ross recently raised concerns regarding new trade barriers created by India, hinting at the stringent e-commerce rules that affected U.S. companies such as Amazon and Walmart-owned Flipkart.

The commerce secretary said the USA had "extra demands" which could not be catered to, adding that talks with the United States did not end favourably.

Last year India retaliated against U.S. tariff hikes on steel and aluminium by raising import duties on a range of goods. "GSP is more symbolic of the strategic relationship, not in value terms", another government official, requesting anonymity, told news agency Reuters.

Trade ties with the United States were hurt after India unveiled new rules on e-commerce limiting the way internet retail giants Amazon.com Inc and Walmart Inc-backed Flipkart do business.

Another opposition came from the medical sector based on price controls on medical devices imposed by India. India also boosted tariffs on electronics and smartphones. "Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion", the USTR said.

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