India to possibly impose higher tariffs on 29 goods imported from the US at a value of $10.6 billion on April 1st.
This would be a direct response to a recent US decision to withdraw duty benefits on $5.6 billion worth of exports from India by May. The reason for the duty benefits withdrawal were the trade barriers created by the Indian government, after negotiations for a trade package fell through.
The Generalised System of Preferences (GSP) programme allows duty-free entry of 1,784 products from India into the US, benefitting exporters of textiles, engineering, gems and jewellery and chemical products.
“India has implemented a wide array of trade barriers that create serious negative effects on United States commerce. Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion,” the office of the United States Trade Representative said in a statement.
— USTR (@USTradeRep) March 5, 2019
In June 2018, India had decided to levy higher tariffs on products such as almonds, apples and phosphoric acid in retaliation to the US unilaterally raising customs duties on certain steel and aluminium products. The implementation of the move was withheld because there were talks on-going between the US and India for a trade package.
“We are weighing all our options. The retaliatory tariffs may kick in either after the current deadline ends or before that. We are reserving our right to drag the US to the WTO (World Trade Organization) as the GSP (generalized system of preferences) withdrawal violates the principle of non-discrimination,” an anonymous Indian commerce ministry official said.
US Commerce Secretary Wilbur Ross recently participated in Trade Policy Forum talks and also voiced concerns regarding new trade barriers created by India, hinting at the stringent e-commerce rules that have affected US companies, including Amazon.com Inc. and Flipkart owner Walmart Inc.
“The fact that India has a $22-billion trade surplus with the US is particularly annoying to the Trump administration,” Live Mint reported.
In response, Indian Commerce Secretary Anup Wadhawan said that disproportionate demands from the US led to the collapse of talks, although India was ready to offer the US greater market access in agricultural products.
Wadhawan said the US brought new issues to the negotiating table, apart from medical devices and dairy products on a “self-initiated basis.” These include issues related to: access for various agriculture, animal husbandry and, information and communications technology products, including mobile phones.
“India was able to offer a very meaningful way forward on almost all the US requests. In a few instances, specific US requests were not found reasonable and doable at this time by the departments concerned, in light of public welfare concerns reflective of India’s developing country status and its national interest,” Wadhawan said.
Wadhawan said the impact of the US action on India’s exports will not be very significant as the duty benefits are worth only $190 million on exports worth $5.6 billion.
Turkey was the other beneficiary of the GSP that had its designation terminated.
“The United States designated Turkey as a GSP beneficiary developing country in 1975. An increase in Gross National Income (GNI) per capita, declining poverty rates, and export diversification, by trading partner and by sector, are evidence of Turkey’s higher level of economic development,” the statement read.
The reason the U.S. intends to terminate Turkey’s designation as a beneficiary developing country under the GSP scheme was explained in a separate letter by U.S. President Trump saying, “I am taking this step because I think that Turkey should not be on the list of developing countries benefiting from GSP based on its level of economic development.”
Ankara’s response was that the decision contradicted the US-Turkey $75 billion trade target.
According to the Daily Sabah, the increase in US-Turkey trade volume that is currently $21 billion to $75 billion has been a center piece of recent phone conversations between Turkish President Recep Tayyip Erdoğan and U.S. President Donald Trump.
Trade Minister Ruhsar Pekcan criticized the move on her official Twitter account and highlighted that removal of Turkey from the GSP program is contradictory to the target of $75 billion in bilateral trade, a mutually agreed goal. “We still would like to pursue our target of increasing our bilateral trade with the U.S. who we see as our strategic partner, without losing any momentum,” she said and added, “This decision will also create repercussions for small and medium-sized enterprises [SMEs] in the U.S.”
1/4 Following the monitoring process going on since last August, the US government officially declared that it will terminate GSP designations for Turkey and India.
— Ruhsar Pekcan (@pekcan) March 5, 2019
Meanwhile, the US-China trade talks to avoid any escalation in the trade war are on-going.
Chinese Commerce Minister Zhong Shan said that the talks over the previous several weeks have been “very difficult” and “very exhausting.”
The two sides are reportedly closing in on a deal to end the trade war that began in July 2018. According to reports, a trade deal could be signed by US President Donald Trump and Chinese President Xi Jinping during a planned meeting in Florida later in March.
“I’d say it’s hard and difficult because the two countries have huge differences in their institutions, cultures and stages of development. The two sides had to make extra efforts [to reach consensus], so it was very difficult, it is very hard,” Zhong said. “[The negotiation] was also exhausting because the time available for negotiation was very limited – we were originally scheduled for two days and then the talks were extended for another two days, but the time was still very limited. Our team worked overtime and overnight.”