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Foreign trade blow for Modi govt ahead of polls: US threatens to withdraw export benefits

PM Modi's regime has lost the opportunity to lobby for the benefits one last time before the general election.

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New Delhi: Ahead of Lok Sabha polls, the Narendra Modi government may be jolted by United States’ decision to withdraw Generalized System of Preference (GSP) — Washington’s largest trade benefit programme for poorer countries like India.

As many of India’s labour-intensive sectors and their exports depend on the GSP, it has long been the whip Washington would crack whenever it sought to coax New Delhi into changing its policy stance.

GSP withdrawal imminent?

With US Commerce Secretary Wilbur Ross cancelling his visit to India at the last moment Wednesday, citing ‘inclement weather’ conditions, Prime Minister Narendra Modi’s regime has lost the opportunity to lobby for the GSP benefits’ continuation for one last time before the general election.

US President Donald Trump’s administration threatening to withdraw GSP benefits is the last blow Modi would have wanted before he faces the polls.

While the authority to grant or withdraw GSP benefits lies with US Trade Representative (USTR) Robert Lighthizer and not the US Commerce Secretary, Ross’ visit was largely seen by India’s trading community as the ‘last chance’ to lobby with the Trump administration and make a case for continuation of the programme, sources told ThePrint.

According to them, the Trump administration is now considering whether it should simply suspend the GSP benefits for an indefinite period or withdraw them completely.

“The USTR has not made up his decision on GSP. But he will make that decision very soon,” an American industry representative said. Lighthizer is not even consulting Ross on this matter as they do not get along very well, the representative added.

Ross, the representative said, is on his way out.

While Ross was to hold the India-US commercial dialogue with Minister of Commerce and Industry Suresh Prabhu and co-chair a US-India CEOs forum and Commercial Dialogue, he will now participate in both meetings via video conference while the US ambassador to India Kenneth Juster will lead the discussions in the forum.

“Withdrawal of GSP is bound to impact jobs in certain labour-intensive sectors. It will lead to job loss,” said Ajay Sahai, director general and CEO, Federation of Indian Export Organisations (FIEO).


Also read: India to benefit from US-China trade war, says UN


Why GSP matters to India

GSP is the largest and oldest US trade preference programme run by the Office of the US Trade Representative under which imports from poorer countries are given preferential or duty-free access.

This is not the first time the US has threatened to pull the plug on the GSP. Since 2008, whenever the programme has come up for review, the US industry — which continues to face trade barriers in India — has questioned India’s eligibility for the GSP.

Although the USTR renewed GSP benefits for India in March 2018, it launched a review the very next month — yet again threatening to withdraw the benefits owing to a petition filed by the US dairy industry and the US medical device industry, given the trade barriers raised by India impacted US exports in those sectors.

At present, India enjoys zero tariffs on goods worth $5.6 billion that are exported to the US. In November last year, US partially withdrew GSP on 50 tariff lines worth $70 million.

Trump has repeatedly called India out for reducing tariffs on US goods, be it Harley-Davidson motorbikes or Bourbon whiskey. He had raised the issue with Modi during his last phone-call to the Indian PM in January.


Also read: Why CAG and Modi govt’s claims of Rafale deal being cheaper are open to debate


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