US PRESIDENT Donald Trump looked set to open a new front in his trade wars yesterday (4) with a plan to end preferential trade treatment for India that allows duty-free entry for up to £4.25 billion worth of its exports to the US.
India played down the impact, saying it was keeping retaliatory tariffs out of its talks with the US, but the opposition could seize on the issue to embarrass prime minister Narendra Modi ahead of general elections this year.
Trump, who has vowed to cut US trade deficits, has repeatedly called out India for its high tariffs, and the US trade officials said scrapping the concessions would take at least 60 days after notifications to Congress and the Indian government.
"I am taking this step because, after intensive engagement between the US and the government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India," Trump told congressional leaders in a letter.
India is the world's largest beneficiary of the Generalized System of Preferences (GSP), which dates from the 1970s, and ending its participation would be the strongest punitive action against it since Trump took office.
The US trade representative's office said India's removal from the GSP would not take effect for at least 60 days after the notifications.
"Discussions are on with the US, and given cordial and strong ties, (we are) keeping retaliatory tariffs out of it," India’s commerce secretary Anup Wadhawan said in New Delhi.
The preferential treatment brought India an annual "actual benefit" of just £144.33 million, he told reporters.
Of the 3,700 products covered, India used the concession for just 1,784, Wadhawan added.
"The benefit to industry is low, US tariffs are already low," said another government official, who spoke on condition of anonymity. "GSP is more symbolic of the strategic relationship, not in value terms."
Farm, marine and handicraft products are among India's exports most likely to be hit, Ajay Sahai, the director general of the Federation of Indian Export Organisations, said, but Indian shares were little changed on the news.
Meanwhile, New Delhi's commerce ministry said that India's tariffs were in line with its commitments to the World Trade Organization, while imports of US oil and natural gas had narrowed Washington's trade deficit with India in recent years.
Monday's decision came as Washington and Beijing seek to negotiate an exit to the Trump administration's most high-profile and costly trade battle.
The US and China eventually agreed to a 90-day truce to work out their differences, and Beijing and Washington have been edging closer to an agreement in recent weeks.
The truce was scheduled to end this week, but Trump lifted an ultimatum on further tariff hikes after expressing satisfaction with the progress made in several rounds of talks.
Under an agreement taking shape, Beijing would lower some barriers on US companies' operations in China and purchase large amounts American agricultural and energy goods if the US lowered most of the tariffs in return.
However, leading news reports have said significant details remained unresolved.
(Reuters/AFP)
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