US President Donald Trump, who once described India as the "tariff king", has said that he intends to end the preferential trade treatment to India and Turkey, asserting that New Delhi has failed to assure America of "equitable and reasonable" access to its markets, a move that could be seen as a major setback to bilateral ties.
The move is the latest push by the Trump administration to redress what it considers to be unfair trading relationships with other countries like China. Trump has pledged to reduce US trade deficits, and has repeatedly called out India for high tariffs.
On Monday, President Trump notified Congress in letters of his "intent to terminate" trade benefits for both countries under the Generalized System of Preferences (GSP) eligibility criteria.
Under the United States 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 USD 5.7 billion in imports to the US given duty-free status and Turkey the fifth largest with USD 1.7 billion in covered imports, according to a Congressional Research Service report issued in January.
In a letter to Speaker of the US House of Representatives Nancy Pelosi, Trump said he was determined that New Delhi had "not assured" the US that it would "provide equitable and reasonable access" to the markets of India.
"I am taking this step because, after intensive engagement between the United States 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 said in the letter to congressional leaders.
"I will continue to assess whether the Government of India is providing equitable and reasonable access to its markets, in accordance with the Generalized System of Preferences (GSP) eligibility criteria," Trump said in his letter, a copy of which was released to the press.
Trump, who has vowed to reduce US trade deficits, has repeatedly called out India for its high tariffs.
At a White House news conference on October 1, the US President described India as a "tariff king" as he reiterated his allegations that New Delhi has a high tariff rate on various American products.
On Saturday, while addressing a four-day annual Conservative Political Action Conference (CPAC) in Maryland, he again accused India of being a "high tariff nation" and threatened to impose "a reciprocal tax" to match the heavy duties that New Delhi imposes on goods imported from the US.
The GSP criteria include, among others, respecting arbitral awards in favour of US citizens or corporations, combatting 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 New Delhi, Commerce Secretary Anup Wadhawan said India exports goods worth USD 5.6 billion under the GSP, and the duty benefit is only USD 190 million annually.
India mainly exports raw materials and intermediate goods such as organic chemicals to the US, he said.
"GSP withdrawal will not have a significant impact on India's exports to the US," the secretary told journalists.
In a separate letter, Trump also informed the Congress of his intent to terminate the GSP beneficiary designation of Turkey.
Trump's letter to Pelosi could be seen as a major setback to India-US bilateral relationship, in particular in the arena of trade and economy.
In a separate statement, the US Trade Representative (USTR) said India's termination from GSP followed its failure to provide the US with assurances that it would provide equitable and reasonable access to its markets in numerous sectors.
Turkey's termination from GSP followed a finding that it was sufficiently economically developed and should no longer benefit from preferential market access to the US market, the statement said.
"By statute, these changes may not take effect until at least 60 days after the notifications to Congress and the governments of India and Turkey, and will be enacted by a Presidential Proclamation," the USTR said.
The Trump administration had launched an eligibility review of India's compliance with the GSP market access criterion in April 2018.
"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 USTR said.
The US had designated Turkey as a GSP beneficiary developing country in 1975.
Reacting to the Trump administration's move, the US-India Business Council urged it to continue the GSP benefits for India.
Despite a number of serious bilateral trade issues, both India and the US have gained from trade under the GSP programme, it said.
USIBC is in the process of collecting more information from both governments on next steps, including any possible reactions by India, the council said in a late night policy alert.
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