New Delhi: The Donald Trump administration is likely to reinstate trade benefits for certain Indian imports under its Generalised System of Preferences (GSP) as a gesture of gratitude for the Narendra Modi government’s decision to send hydroxychloroquine (HCQ) and paracetamol to the US amid the Covid-19 pandemic, ThePrint has learnt.
According to a high-level diplomatic source, the bilateral discussion to bring back India under the US trade programme has been ongoing ever since the Trump administration revoked the benefits to New Delhi in June last year. However, the US now believes that these should be restored for India as a “symbolic gesture”.
India’s move to send critical drugs like HCQ and paracetamol for Covid-19 has made the US government realise India’s importance in the global supply chains, said the source. The Modi government’s decision to export HCQ to the US last month had created a row at home.
Until it was removed from the GSP list, India used to get benefits worth around $6 billion — out of the $46 billion worth of goods it exports to the US — by means of zero or reduced tariffs on 2,167 products. The preferential treatment was given mostly to labour-intensive sectors like leather, jewellery and engineering.
“India, especially the Ministry of Commerce and Industry has already done its calculation and said the impact has not been much due to removal of the benefits. But restoring it definitely adds to symbolism. This strengthens the fact that the US-India relationship is stronger than before,” said the source, who did not wish to be named.
GSP as part of trade package?
According to the sources, the US and India are considering if the restoration of GSP benefits must be done separately or within the limited bilateral trade deal that is being negotiated currently.
“The need for a trade deal, even if a smaller one, is now important for both countries post the pandemic. Officials are in constant discussion over this and reinstatement of the GSP benefits will bring a symbolic significance,” said a second source, on the condition of anonymity.
The US is also considering sending some critical medical devices like ventilators and testing kits as part of “humanitarian aid” to India, the sources said.
India is also engaged with the US to procure RT-PCR (Reverse Transcription–Polymerase Chain Reaction) and rapid antibody test kits, RNA (ribonucleic acid) extraction kits and other medical supplies according to requirements. US companies have expressed interest in supplying to New Delhi, and in some cases, orders have already been placed, Indian Ambassador to the US Taranjit Singh Sandhu had told ThePrint in an interview last month.
Caution about ‘speculation’
Mark Linscott, former assistant US trade representative (USTR) for South and Central Asian Affairs, said, “The bilateral work on Covid-19 was clearly very positive. It could accelerate efforts to get a trade deal, including restoration of India’s GSP benefits…
“I hope a bilateral trade deal is struck soon but the two sides need to work out all the specifics for that. And I expect GSP will have to be part of that trade deal and not done separately,” he said.
Linscott, a senior fellow at think-tank Atlantic Council’s South Asia Center, also cautioned that this could all be a “speculation” building up on both sides even as hard negotiations still need to be done on certain agriculture issues, electronic payment systems and a new digital trade dialogue, among others.
India has already said it does not want to “rush into a trade deal” with the US or negotiate an agreement in a hurry as it is still facing issues arising out of the FTAs signed earlier with other countries.
Both the countries were close to signing a limited trade package in September last year when Prime Minister Narendra Modi visited the US for the UN General Assembly meet. The visit saw Modi and US President Donald Trump show unprecedented bonding at the ‘Howdy Modi’ event. But the deal didn’t work out as differences widened, particularly on information and communication technology imports and medical devices.
A much-awaited visit by US Trade Representative Robert Lighthizer, US’ main trade negotiator, to India also got cancelled in February.
During Trump’s visit to India in February this year for the ‘Namaste Trump’ event, both sides agreed to step up bilateral ties, saying the relationship was now a ‘Comprehensive Global Strategic Partnership’ even as they vowed to sign a “bigger” trade deal.