New Delhi, February 11: U.S is all set to take disciplinary action against India and is planning to withdraw the Generalized System of Preferences (GPS), amid an ongoing dispute over India’s trade and investment policies. The move is being feared, as India will lose a crucial U.S trade concession, under which it enjoys zero tariffs on over $5.6 billion of exports to the United States.
Vowing to reduce the U.S deficit with large economies, this will be the strongest punitive action against India since President Donald Trump took office in 2017.
This came after India rolled out new rules on e-commerce that restricted major international e-commerce companies, like Amazon and Flipkart-backed Walmart, from carrying out business in a rapidly growing online marketplace. This was done to make sure that a level playing field is maintained and the services are provided in a fair and non-discriminatory manner. This, however, triggered the latest downturn of events. According to a report by Reuters, Amazon, and Walmart, as well as the U.S. government, had lobbied against the sudden policy change.
Moreover, in a bid to improve and fast-track legal investigation, the Reserve Bank of India (RBI) in 2018, mandated that all data generated by the payment systems in India is to be stored in India. This forced global card payment companies such as Mastercard and Visa to move their data to India. U.S. lobby groups had voiced concerns about those proposals too, saying they made it difficult for companies to do business in the country.
Trump has repeatedly called out India for its high tariffs and unfavorable policies, and the imposition of higher tariffs on electronic products and smartphones added to the feud.
In order to counter this, Trump has courted U.S manufacturing companies operating in India to return home as a part of his ‘Make America Great Again’ campaign.
If the United States eliminates duty-free access for about 2,000 Indian products, it will mostly hurt Micro, Small & Medium Enterprises (MSMEs). It has been speculated that the number of goods qualifying for preferential treatment could be reduced, or the whole program could be withdrawn. India also fears that Trump may demand a free trade agreement if both sides fail to reach a compromise on the trade package.
“The US Trade Representative was completing a review of India’s status as a GSP beneficiary and an announcement was expected over the next two weeks,” said one of the sources in an interview to Reuters.
The events, however, will demystify only after U.S Commerce Secretary Wilbur Ross’s visit next week.