Donald Trump had made a similar announcement in March. (File)
Highlights
- "India hasn't assured of reasonable access to its markets," says Trump
- Generalised System of Preference is largest US trade preference programme
- India was the largest beneficiary of the programme in 2017
President Donald Trump has ended India's designation as a beneficiary developing nation under a key preferential trade programme after determining that it has not assured the US that it will provide "equitable and reasonable access to its markets."
The Generalised System of Preference (GSP) is the largest and oldest US trade preference programme and is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.
"I have determined that India has not assured the US that it will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India's designation as a beneficiary developing country effective June 5, 2019," Mr Trump said in a proclamation on Friday, ignoring the plea made by several top American lawmakers.
On March 4, Mr Trump announced that the US intends to end India's designations as a beneficiary developing country under the GSP programme. The 60-day notice period ended on May 3.
The Trump administration has prioritised working with the Indian government to ensure that US companies have a level-playing field, a senior State Department official told reporters on Thursday, hours after Prime Minister Narendra Modi was sworn in for a second time following his spectacular electoral victory in the general election.
Under the GSP programme, nearly 2,000 products including auto components and textile materials can enter the US duty-free if the beneficiary developing countries meet the eligibility criteria established by Congress.
India was the largest beneficiary of the programme 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.
The GSP criteria includes, among others, respecting arbitral awards in favour of the US citizens or corporations, combating child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection, and providing the US with equitable and reasonable market access.
Countries can also be graduated from the GSP programme depending on factors related to economic development.
In a statement, Coalition for GSP executive director Dan Anthony said Mr Trump's decision will cost American businesses over $300 million in additional tariffs every year.
"Without GSP benefits American small businesses face a new tax that will mean job losses, cancelled investments and cost increases for consumers. Only a year after the Senate and House passed a three year reauthorisation of the GSP by a near unanimous margin, the Trump administration has kicked out the GSP country that saves American companies more money than any other," he said.
Mr Anthony said the Trump administration made the decision in the face of opposition from members of the Congress and hundreds of American businesses that have called for continued GSP eligibility for India.
"They also acted despite India's willingness to negotiate new market access for American exports. Thus, there are no winners from today's decision. American importers will pay more, while some American exporters will continue to face current market access barriers in India and others, including farmers, are very likely to be subject to new retaliatory tariff," Mr Anthony said.
The Trump administration argues that New Delhi has failed to assure America that it will provide equitable and reasonable access to its markets in numerous sectors.
India had said that the US government's move to withdraw duty concessions on certain products under the GSP programme will not have a significant impact on exports to America as the benefits were only about $190 million annually.