US Trade Representative Current Affairs - 2019
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The United States is reportedly considering withdrawal of benefits to India under its Generalised System of Preferences amid a widening dispute over its trade and investment policies.
The US Trade Representative (USTR) is in the process of completing the review of India’s status as a GSP beneficiary and an announcement was expected over the next two weeks.
The withdrawal of the Generalised System of Preferences from India could be the strongest punitive action since President Donald Trump took office in 2017 vowing to reduce the US deficit with large economies. The Trump administration has repeatedly called out India for its high tariffs.
Generalised System of Preferences
Generalised System of Preferences instituted in 1976 under the Trade Act of 1974 is a U.S. trade program designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories.
Impact on Trade with India
The withdrawal of the Generalised System of Preferences from India would result in the elimination of duty-free access for about 2,000 Indian product lines. This will hurt small businesses such as jewellery. This will adversely affect Indian exports to the US. After the withdrawal of the Generalised System of Preferences number of goods qualifying for preferential treatment could be reduced, or the whole programme could be withdrawn.
The US Trade Representative (USTR) has challenged Indian export subsidy schemes at World Trade Organisation (WTO), saying these programmes harm its manufacturing sector and workers by creating an uneven playing field.
According to USTR, at least half a dozen Indian programmes provide financial benefits to Indian exporters, which allow them to sell their goods more cheaply to detriment of US workers and manufacturers. These programs are Merchandise Exports from India Scheme (MEIS), Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware Technology Parks Scheme, Special Economic Zones (SEZs), Export Promotion Capital Goods Scheme (EPCGS) and Duty Free Imports for Exporters Programme.
It has alleged that through these programmes, India has given exemption from certain duties, taxes, and fees which benefits numerous exporters, including producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel.
It also has alleged that earlier India was under limited exception rule under WTO specified for developing countries. It allowed specified countries to continue to provide export subsidies temporarily until they reach defined economic benchmark. But now it has surpassed benchmark in 2015. India’s exemption has expired, but India has not withdrawn its export subsidies and in fact it has increased size and scope of these programs.
The US administration under President Donald Trump has taken various protectionist measures in an attempt to bring down its trade deficit from around $800 billion annually. For this, it is holding its trading partners accountable by vigorously enforcing US rights under various trade agreements and by promoting fair and reciprocal trade through all available tools, including the WTO. Earlier in March 2018, the Trump administration had announced tariffs of 25% and 10% on all steel and aluminum imports citing national security issue.