“We have been discussing various issues with the US such as GSP restoration, and withdrawal of their Section 232 tariffs and our retaliatory duties,” said an official. The two sides have been engaged in talks to iron out the differences, which began last year when the US levied global additional tariffs of 25% and 10% on the import of steel and aluminium products, respectively.
India responded by levying retaliatory tariffs on 28 products originating or exported from the US with effect from June 16, for which Washington dragged it to dispute at WTO. Talks collapsed after the US withdrew incentives to $6.3 billion of Indian exports under the GSP programme effective June 5. Prime Minister Narendra Modi is travelling to the US later this month to attend the UN General Assembly.
Commerce minister Piyush Goyal is also likely to visit Washington soon. Officials said while the economic impact of GSP withdrawal on India’s exports is not significant, these issues have longterm strategic implications and should not become deal breakers.
“The economic impact of GSP is not significant and industry is not unhappy with its withdrawal but it has implication on our bilateral relations. Some sectors have been hurt and these issues should not become sticking points,” the official added. Argentina, Liberia and Myanmar are a few countries where the US reinstated the benefits after they made “sufficient progress” to be eligible for them.
Indian exporters of chemicals, engineering goods, leather, and gems & jewellery have been impacted by the withdrawal.
But some exporters said the impact was not much. “We understand that GSP is given to developing countries, which meet eligibility norms, and it was a benefit for us,” a Mumbai-based exporter of chemicals said. “However, with the US also raising tariffs on Chinese chemicals, the withdrawal has not impacted us much.”
The preferential tariffs under the GSP on Indian exports range between 1% and 6%. Trade experts said while GSP can not be completely ignored, New Delhi must be cautious of what can be given in return. “The GSP withdrawal may be hurting some sectors but, at the same time, it is not worth giving concessions on intellectual property rights and ecommerce because that would do long-term damage,” said a Delhi-based expert on trade issues.
Another expert explained that the absence of GSP is a blow to India’s competitive advantage at a time when the US-China trade war has thrown open more opportunity to increase trade but India must carefully weigh its options.