Trade deficit Current Affairs - 2019
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President Trump notified the Congress his intent to terminate trade benefits for both India and Turkey under the Generalized System of Preference (GSP) eligibility criteria.
India and GSP
- About 2,000 products, including auto components and textiles, can enter the US duty-free if the beneficiary developing country meet the eligibility criteria.
- India was the largest beneficiary of the GSP programme in 2017 with $5.7 billion in imports to the US given duty-free status.
Why the US is planning to withdraw GSP for India?
- President Trump has accused India of failing to ensure the US of “equitable and reasonable” access to its markets. The US is pressing India to reduce US trade deficits and has repeatedly called out India for high tariffs.
- Withdrawal of GSP is part of the President Trumps plan to redress what it considers to be unfair trading relationships.
India has sought talks with the US to avoid the withdrawal of the trade benefits under the GSP. India has offered a trade package to the US which promises of about Rs 35,000 crore annually in oil and gas imports from the US and another Rs 1,00,000 lakh crore in defence orders in the coming years.
Afghanistan has launched a new export route to India through the through the Chabahar Port of Iran. 23 trucks carrying 57 tonnes of dried fruits, textiles, carpets and mineral products were dispatched from western Afghan city of Zaranj to Iran’s Chabahar port. The consignment would be then shipped to Mumbai.
Chabahar port is seen as a testimony of healthy cooperation between India, Iran and Afghanistan this will ensure economic growth. The Chabahar Port of Iran provides easy access to the sea for Afghanistan. India has invested in the development of this route as well as Chabahar port. This route allows both India and Afghanistan to engage in trade bypassing Pakistan.
Afghan exports to India stood at $740 million in 2018 and India is the largest export destination for Afghanistan. The new route is one of the many initiatives undertaken by the governments of India and Afghanistan to enhance trade relations.
To boost the trade relations, both India and Afghanistan had established an air corridor in the year 2017. The opening of new avenues for Afghanistan to trade with India will aid Afghanistan in to reduce its trade deficit.
After the withdrawal from JCPOA and reimposing of sanctions on Iran, US had granted an exception for the development of Chabahar port since the new transportation corridor could contribute significantly for Afghanistan’s economy and meet their needs of non-sanctionable goods such as food and medicines.