Indian exports up to $5.6 billion could be hit as the US pressures India for greater market access by declaring a review of the generalized system of preferences (GSP) through which Indian exporters get preferential market access to the US.
The GSP programme allows duty-free entry of 3,500 products from India, which benefits exporters of textiles, engineering, gems and jewelry and chemical products. The total US imports under GSP in 2017 was $21.2 billion, of which India was the biggest beneficiary with $5.6 billion, followed by Thailand ($4.2 billion) and Brazil ($2.5 billion).
The Trump administration has been accusing India of unfair trade practices and has challenged most of its export subsidies at the World Trade Organization (WTO). It has also not granted India an exemption on a unilateral hike in steel and aluminium tariffs, unlike to its other strategic allies. On Friday, the US treasury department added India to the currency practices watch list saying New Delhi increased its purchase of foreign exchange by $56 billion in 2017 which does not appear necessary given its already robust foreign exchange reserves.
For India, the GSP country eligibility review is based on concerns by the US dairy industry and medical device industry alleging Indian trade barriers affecting US exports in those sectors. India has very high import duties on dairy products to protect its domestic industry. It has also recently put price controls on medical devices like cardiovascular stents, drawing ire from big US pharma companies.
Though GSP is a voluntary measure by the US and other developed countries, they need to be guided by firm WTO principles, Das said. In 2003, India won a case against the European Commission as the latter denied India GSP on textiles and drugs, making such preferences conditional to countries combating drug production and trafficking or protection of labor rights and environment.