Mains Paper 2: International relations| Effect of policies and politics of developed and developing countries on India’s interests, Indian Diaspora.
From UPSC perspective, the following things are important:
Prelims level: Basic knowledge of India-US trade relations.
Mains level: The news-card analyses the India-US trade relation in recent times, in a brief manner and impact of GSP review.
The U.S. has ultimately acted on its threat to withdraw concessions granted to Indian imports under the Generalised System of Preferences.
Emerging tensions in trade
- India-U.S. trade tensions escalated last year when the U.S. took two consecutive decisions to increase import tariffs on steel and aluminium, and place India’s eligibility for GSP benefits under review.
- Shortly after, India said it would impose retaliatory tariffs on imports from the U.S. and even notified the list of items on which these would apply.
- The GSP review, however, stretched on, with the two countries holding frequent talks to address the concerns. India, for its part, postponed the deadline for the imposition of the retaliatory tariffs six times; the latest deadline is on April 1.
Reasons to review GSP status
- Washington’s decision to review India’s GSP status stemmed from complaints from American medical and dairy industries, both of which said India was not providing “equitable and reasonable access to its market”.
- India has said it had tried hard to cater to most of the U.S. demands and reach an understanding, but key points of difference, especially regarding India’s cultural concerns to do with dairy products, could not be accommodated.
- The U.S. has been expressing discontent over India’s policies to do with data localisation and FDI rules in e-commerce.
- Commerce Ministry said that the GSP benefits amounted to only $190 million while India’s total exports under GSP to the U.S. stood at $5.6 billion.
Options before the Indian government
- Talks on the issue would still continue during the 60-day period after which the GSP decision would come into effect.
- The other option the government can exercise is to impose retaliatory tariffs on U.S. goods.
- It bears emphasis that while the actual amounts at stake are relatively small, with even India’s proposed tariffs on the U.S. amounting to just $900 million, the impact on small industries in the country could nevertheless be significant.
- Export bodies have already said that such industries would lose their market share in the U.S. without fiscal support to help them maintain their edge. In its absence, orders meant for India could go to other GSP countries, signs of which are already evident.