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Trade benefits with US gone, Modi govt now plans to offer a ‘better’ package to Trump

India watchers not optimistic that new offer, of better market access to US agriculture and dairy products, will cut much ice with Trump administration.

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New Delhi: India has decided to offer yet another “favourable” trade package to the US after the Trump administration withdrew trade benefits given to New Delhi under the Generalised System of Preferences (GSP) programme, multiples sources told ThePrint.

India’s package, which seeks to give more market access to American agricultural goods and dairy products, will be officially offered by Prime Minister Narendra Modi during his meeting with US President Donald Trump on the sidelines of the G20 Summit, scheduled in Osaka (Japan) on 28 and 29 June, official sources said requesting anonymity.

India had offered a similar trade package to the US in March when Washington had threatened to withdraw the GSP benefits. While the Trump administration had then extended the GSP programme, it ultimately rejected India’s package and has now withdrawn the benefits.

US keen on FTA with India

According to diplomatic sources, the US may not really be enthused by the offer of another trade package even though India is now planning to offer greater trade concessions on American goods. This is because what Washington truly wants now is to clinch a free trade agreement with New Delhi, something that US President Donald Trump has been pushing for with countries that the US has a trade deficit with. Besides, Trump has repeatedly berated India for having high tariffs.

Meanwhile, sources said, India is planning to negotiate with the US for yet another extension of the GSP benefits but it is unlikely to be extended any further. India had been also delaying imposing retaliatory tariffs on US goods since January.

The matter will be taken up during the upcoming visit of US Secretary of State Mike Pompeo to India later this month, sources added. The visit has not yet been officially announced.

Under President Trump, the US has been aggressively pitching trade pacts with China, Japan and Europe in order to address its trade deficit. Sources also said the US now expects India to push the pedal on kick-starting talks for a trade agreement, something that the previous Modi regime had shied away from.

Also read: Trump plans to withdraw trade advantage to India: What’s GSP & how it will hurt exporters

India gets support from American businesses

While the Modi government has termed the US move to remove GSP benefits as being “unfortunate”, it has received support from some unexpected quarters — American industries and business that have voiced concern against such a move.

The Washington-based Coalition for GSP has said that the decision will cost American businesses over $300 million in additional tariffs every year.

Some stakeholders are in favour of a trade deal.

“India needs to take a structural approach rather than transactional in order to remove this emerging irritant. The long-term vision should be a free trade agreement (FTA), which addresses the important issue of mobility too,” said Mukesh Aghi, president and CEO, US-India Strategic Partnership Forum (USISPF).

“An FTA roadmap would provide an immediate short-term solution while building US-India strategic relations to a $500 billion bilateral trade.”

Nisha Biswal, president, US-India Business Council at US Chamber of Commerce, said that the main concern for American companies operating in India is market access, including price controls on medical devices and tariffs on information and communications technology (ICT).

“However, these issues can be better resolved through continued dialogue and engagement,” Biswal tweeted.

The GSP benefits

According to a statement issued by the White House last week, the GSP benefits will not be available to Indian exporters from 5 June onwards. India has been using these benefits to export some of the products to the US on a preferential basis since 1975.

“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 the statement. “Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.”

India gets GSP benefits worth $5.6 billion out of the $46 billion worth of goods it exports to the US by means of zero or reduced tariffs. It is given mostly to labour-intensive sectors such as leather, jewellery and engineering, among others. Withdrawing the GSP benefits would have had an impact on jobs.

India currently enjoys a trade surplus of $21.27 billion with the US, according to the 2017-18 data from the Ministry of Commerce and Industry.

Also read: Is India’s protectionism reason enough for Donald Trump’s GSP move or is US being a bully?

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  1. The Trump administration is extraordinarily difficult to deal with on trade issues. It would be facile to believe that India could pick up some tangential benefits from the intensifying US – China trade war. Even more tricky to navigate for India would be the more conventional Cold War that is playing out. China’s Defence Minister attended the Shangri La Dialogue in Singapore after a gap of eight years. He was blunt in stating that China would not buckle, either on trade or on geopolitics. Prime Minister has chosen well. No better person than EAM Dr Jaishankar to assist him in the challenges that lie ahead, all the more if President Trump serves till 2024.

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