Washington, DC – The United States on Monday (March 4) announced the termination of India’s preferential trade treatment according to a statement from the office of US Trade Representative (USTR). The announcement follows a letter from the US President Donald Trump to the congressional leadership his decision to terminate this agreement.
In a letter addressed to the Speaker of Congress, the Lower House and the President of the Senate, the Upper House, President Trump wrote, “In accordance with section 502(f)(2) of the Trade Act of 1974, as amended (Trade Act) (19 U.S.C. 2462(f)(2)), I am providing notice of my intent to terminate the designation of India as a beneficiary developing country under the Generalized System of Preferences (GSP) program.”
Elaborating on the reasons for taking this step, the US president said, “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 as set forth in section 502(c)(4) of the Trade Act (19 U.S.C. 2462(c)(4)).”
President Trump in his letter to the lawmakers’ leaders concluded, “I will continue to assess whether the Government of India is providing equitable and reasonable access to its markets, in accordance with the GSP eligibility criteria.”
In another letter, President Trump also removed the similar status of Turkey, a close ally and a fellow NATO member.
On the basis of the aforementioned letters, US Trade Representative Robert Lightizer announced that the “United States intends to terminate India’s and Turkey’s designations as beneficiary developing countries under the Generalized System of Preferences (GSP) program because they no longer comply with the statutory eligibility criteria.”
Further echoing the reasons cited by the president, USTR blamed India’s termination from GSP on “its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors.” On the other hand, Turkey’s termination from GSP was based on, “a finding that it is sufficiently economically developed and should no longer benefit from preferential market access to the United States market.”
The process for evaluating India’s position started in April 2018 when the US launched an eligibility review of India’s compliance with the GSP market access criteria. Noting that India implemented “a wide array of trade barriers that create serious negative effects on United States commerce,” the USTR lamented that despite intensive engagement, “India has failed to take the necessary steps to meet the GSP criterion.”
With the notifications to the US lawmakers going out on March 4, the USTR noted that the changes might 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.”
Under the United States GSP program, certain products can enter the United States duty-free if beneficiary developing countries meet the eligibility criteria established by Congress. GSP criteria include, among others, respecting arbitral awards in favor of United States citizens or corporations, combating child labor, respecting internationally recognized worker rights, providing adequate and effective intellectual property protection, and providing the United States with equitable and reasonable market access. Countries can also be graduated from the GSP program depending on factors related to economic development.