Trump Ends India’s Trade Designation as a Developing Nation

  • Economics
Trump Ends India’s Trade Designation as a Developing Nation

President Donald Trump terminated India’s designation as a developing nation under a trade program, eliminating an exception that allowed the country to export nearly 2,000 products to the U.S. duty-free.

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

The action, which the administration has threatened for months, ends India’s preferential treatment under the Generalized System of Preferences, a decades-old program designed to promote economic development.

India said on Saturday that it had offered resolutions to the U.S. during bilateral trade discussions, and it’s “unfortunate” that those weren’t accepted. While the country will continue to work on improving ties with the U.S., its trade decisions would be guided by its own “development imperatives and concerns,” according to a statement from India’s trade ministry.

The Trump administration has said concerns over market access for American goods being exported to India led them to withdraw the benefits, which prohibited duties on about $5.7 billion in imports in 2017, according to the Congressional Research Service.

In May, Trump announced that he was ending Turkey’s preferential trade treatment. Turkey was the fifth-largest beneficiary of the program -- which allowed some Turkish exporters to sell products in the U.S. duty free -- in 2017 with $1.7 billion in covered imports to the U.S. and India was the largest with $5.7 billion, according to a Research Service report issued in January.

The White House announcement on Friday came a day after Indian Prime Minister Narendra Modi was sworn into office for a second term after a landslide victory in last week’s national elections.

Indian exporters may have forego benefits worth $260 million after the U.S. elimination, according to the Federation of Indian Export Organisations.

While the warning came months ago that the White House could cut India’s preferential treatment, the Trump administration decided to hold off on the announcement until after India’s elections to avoid hurting Modi politically, according to people familiar with the matter who asked to not be identified in order to discuss internal deliberations.

U.S. Trade Representative Robert Lighthizer, who has grown increasingly irked over India’s trade barriers and practices, has a longstanding frustration with the country’s self-designation as a developing nation at the World Trade Organization, the people said.

The March notice gave India two months to address the administration’s concerns before Trump made the end to the tariff treatment official.

The proclamation issued by the White House on Friday also subjects solar cells and washing machines from India and Turkey to duties imposed by Trump in 2018. Both nations had been exempted because of their status as developing countries.

Dan Anthony, executive director of the Coalition for GSP, a trade group, said that the decision “will cost American businesses over $300 million in additional tariffs every year.”

“There are no winners from today’s decision,” Anthony said in a statement. “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 tariffs.”

Source: Bloomberg