US to end trade privileges for India on June 5, says Donald Trump

The United States on Friday formally terminated India’s eligibility for a duty-free import scheme for developing countries saying it has not given assurances it “will provide equitable and reasonable access to its markets” to US companies as required under relevant American trade laws.

The impending termination was previewed Thursday by a senior administration official, who described it as a “done deal” and said it is time for the two countries to move on, and try to resolve other trade irritants. The official had, however, left open the possibility of restoring these benefits if and when India complied with American demands for greater market access to it dairy products and medical devices sectors.

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“I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets,” US President Donald Trump said in a proclamation issued Friday. “Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.”

President Trump had conveyed is intention to terminate India’s eligibility for the programme — Generalized System of Preferences (GSP) — to the US congress on March 4. And the formal termination became due on May 4, after the mandatory 60-day notice period.

But the administration held off on the proclamation as India was in the middle of elections at the time and there was pressure from US lawmakers, from both parties, to delay the termination to allow more time for negotiations. There was expectation that India could avert the termination.

But the Trump administration had concluded much before, according to people close to the developments, that India would not be able to deliver no matter how much additional time it was given. But it agreed to wait for the elections to get over, and announced the termination just a day after Prime Minister Narendra Modi began his second term. No talks were underway at the time contrary to public assurances from Indian officials.

This US action, that had been expected for long, presents the first major challenge for the new Modi government regarding relations with the United States, as there is talk the Trump administration might not stop at this and could be considering even more precipitate actions in line with President Donald Trump’s tough posture on trade.

India has been the largest beneficiary of this duty-free programme which allows certain imports from 120 countries to enter the United States at zero tariff. It sold an estimated $6.3 billion worth of goods to the United States under this programme in 2018 , according to a new report by the Congressional Research Service, a non-partisan source of research, analysis and projections for US lawmakers.

Withdrawal of zero-tariff benefits would subject these products, presuming their volumes remain unaffected, to $190 million, according to official Indian estimates. But people familiar with these discussions fear the new tariffs could make these products costlier for US importers, who could then switch from Indian suppliers to those who can supply for less, minus the tariff, to keep down their prices.