The United States (US), on June 5, withdrew duty-free market access to over 3,600 products that it was providing to India under the Generalised System of Preferences (GSP). &nbsp;

The GSP was put in place in 1971, under which 13 developed countries provide duty-free access to designated products for beneficiary developing countries. &nbsp;

While most developed countries introduced the GSP in 1971, the US accepted this system of preferences in 1976, after the Trade Act of 1974 authorised the US president “to extend duty-free treatment to certain eligible products imported into the United States from beneficiary developing countries”. &nbsp;

The US extended GSP benefits to 104 countries before it removed India from the list of “beneficiary developing countries”.

The Trade Act of 1974 also outlined a set of conditions for determining whether any country should be designated as a beneficiary developing country.

These are: (i) a request by the country to be so designated, (ii) the level of economic development of such a country, (iii) whether or not the other major developed countries extend their GSP scheme to the country, and (iv) the extent to which the country has assured the US of equitable and reasonable access to its market and basic commodity resources. &nbsp;

These conditions gave the US trade administration discretionary powers. Alongside, the Act also introduced a mechanism that was to be used to review if specific products originating in the beneficiary developing countries could continue to enjoy the GSP benefits. &nbsp;

One of the key mechanisms is Competitive Need Limitations (CNL). This states that a beneficiary developing country could lose its GSP eligibility with respect to any product if the CNLs are exceeded. &nbsp;

There are two measures for CNLs: (i) when, during any calendar year, import of a particular product into the US from a beneficiary developing country accounts for 50 per cent or more of the value of total imports of that product into the US, or (ii) exceeds a certain dollar value. As per the GSP rules, the dollar-value limit is increased by $5 million annually. The limit set in 2017 was $180 million.&nbsp;

There were indications since last year that the Trump Administration was taking steps towards eventually denying India the benefits under GSP. &nbsp;

The US president, on October 30, 2018, announced the decision to exclude 94 products from the list of GSP-eligible products, for 16 countries beginning November 1, 2018. &nbsp;

There were 50 products in the exclusion list in which India was the principal beneficiary. The targeted list of products for India was the largest among the 16 countries, whose products lost the GSP beneficiary status.

In March 2019, the United States Trade Representative (USTR) announced the Trump administration’s intent to terminate India’s designation as a beneficiary developing country under its GSP programme since it was not complying with the “statutory eligibility criteria”. &nbsp;

India was targeted, according to the USTR, for its failure to provide the US with “assurances that it will provide equitable and reasonable access to its markets in numerous sectors”. &nbsp;

This was the beginning of a mandatory 60-day period, which is required to be given before a final decision was taken whether to retain the country in the list of beneficiaries. &nbsp;

Finally, on May 31, Trump announced his decision to remove India as a beneficiary country under the US GSP programme, effective from June 5.

The decision of the US president was based on an eligibility review conducted by the USTR in April 2018. This review was conducted on “concerns” related to India’s compliance with the GSP market access criterion, but more importantly, on two petitions related to the same criterion. &nbsp;

The petitions were filed by the US dairy industry and the US medical device industry (Advanced Medical Technology Association) requesting the USTR to withdraw India as a beneficiary country, given Indian trade barriers affecting US exports in those sectors. &nbsp;

The latter petition was regarding the price controls that the government of India had introduced for coronary stents and knee implants aimed at making such devices affordable in the country.

These expressed reasons for removing India from the list of GSP beneficiaries hardly sound convincing. It is clearly part of a strategy adopted by the Trump administration to target the Indian market. &nbsp;

Trump has frequently spoken of the “disadvantage” the US faces due to India being a “very high-tariff nation”. There should be no doubt that there will be further measures taken against India, including implementing “a measure in the form of a safeguard to address increased imports of articles that are a substantial cause of serious injury to a domestic industry producing competitive products”; this was mentioned by Trump in his May 31 proclamation.

What are the implications of India’s removal from the list of US GSP beneficiary countries? According to research conducted for the US Congress, in 2018, India was the largest beneficiary developing country, accounting for over 25 per cent of US imports under GSP. &nbsp;

India’s exports of GSP beneficiary products were $15 billion during April-February 2018-19, which was just less than a third of the total exports to the US. &nbsp;

Six sectors – gems and jewellery, electrical and non-electrical machinery, chemicals, auto components and iron and steel products were the main beneficiaries – with each sector exporting more than a billion dollars. These products would now have to pay tariffs to enter the US market.

It may be mentioned that the tariffs on these products is below 3 per cent for nearly a fourth of the total, which are usually called “nuisance tariffs” because they effectively provide no protection to the domestic industry. &nbsp;

But, these tariffs could cause considerable “nuisance” to the exporters in the form of procedural formalities that would have to be thoroughly reviewed. This would increase the cost of the transaction with regard to exporting to the US. &nbsp;

(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-decoding-the-gsp-puzzle-2759399">original article)</a>

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)&nbsp;

The United States (US), on June 5, withdrew duty-free market access to over 3,600 products that it was providing to India under the Generalised System of Preferences (GSP).

The United States (US), on June 5, withdrew duty-free market access to over 3,600 products that it was providing to India under the Generalised System of Preferences (GSP). The GSP was put in place in 1971, under which 13 developed countries provide duty-free access to designated products for beneficiary developing countries. While most developed countries introduced the GSP in 1971, the US accepted this system of preferences in 1976, after the Trade Act of 1974 authorised the US president “to extend duty-free treatment to certain eligible products imported into the United States from beneficiary developing countries”. The US extended GSP benefits to 104 countries before it removed India from the list of “beneficiary developing countries”. The Trade Act of 1974 also outlined a set of conditions for determining whether any country should be designated as a beneficiary developing country. These are: (i) a request by the country to be so designated, (ii) the level of economic development of such a country, (iii) whether or not the other major developed countries extend their GSP scheme to the country, and (iv) the extent to which the country has assured the US of equitable and reasonable access to its market and basic commodity resources. These conditions gave the US trade administration discretionary powers. Alongside, the Act also introduced a mechanism that was to be used to review if specific products originating in the beneficiary developing countries could continue to enjoy the GSP benefits. One of the key mechanisms is Competitive Need Limitations (CNL). This states that a beneficiary developing country could lose its GSP eligibility with respect to any product if the CNLs are exceeded. There are two measures for CNLs: (i) when, during any calendar year, import of a particular product into the US from a beneficiary developing country accounts for 50 per cent or more of the value of total imports of that product into the US, or (ii) exceeds a certain dollar value. As per the GSP rules, the dollar-value limit is increased by $5 million annually. The limit set in 2017 was $180 million. There were indications since last year that the Trump Administration was taking steps towards eventually denying India the benefits under GSP. The US president, on October 30, 2018, announced the decision to exclude 94 products from the list of GSP-eligible products, for 16 countries beginning November 1, 2018. There were 50 products in the exclusion list in which India was the principal beneficiary. The targeted list of products for India was the largest among the 16 countries, whose products lost the GSP beneficiary status. In March 2019, the United States Trade Representative (USTR) announced the Trump administration’s intent to terminate India’s designation as a beneficiary developing country under its GSP programme since it was not complying with the “statutory eligibility criteria”. India was targeted, according to the USTR, for its failure to provide the US with “assurances that it will provide equitable and reasonable access to its markets in numerous sectors”. This was the beginning of a mandatory 60-day period, which is required to be given before a final decision was taken whether to retain the country in the list of beneficiaries. Finally, on May 31, Trump announced his decision to remove India as a beneficiary country under the US GSP programme, effective from June 5. The decision of the US president was based on an eligibility review conducted by the USTR in April 2018. This review was conducted on “concerns” related to India’s compliance with the GSP market access criterion, but more importantly, on two petitions related to the same criterion. The petitions were filed by the US dairy industry and the US medical device industry (Advanced Medical Technology Association) requesting the USTR to withdraw India as a beneficiary country, given Indian trade barriers affecting US exports in those sectors. The latter petition was regarding the price controls that the government of India had introduced for coronary stents and knee implants aimed at making such devices affordable in the country. These expressed reasons for removing India from the list of GSP beneficiaries hardly sound convincing. It is clearly part of a strategy adopted by the Trump administration to target the Indian market. Trump has frequently spoken of the “disadvantage” the US faces due to India being a “very high-tariff nation”. There should be no doubt that there will be further measures taken against India, including implementing “a measure in the form of a safeguard to address increased imports of articles that are a substantial cause of serious injury to a domestic industry producing competitive products”; this was mentioned by Trump in his May 31 proclamation. What are the implications of India’s removal from the list of US GSP beneficiary countries? According to research conducted for the US Congress, in 2018, India was the largest beneficiary developing country, accounting for over 25 per cent of US imports under GSP. India’s exports of GSP beneficiary products were $15 billion during April-February 2018-19, which was just less than a third of the total exports to the US. Six sectors – gems and jewellery, electrical and non-electrical machinery, chemicals, auto components and iron and steel products were the main beneficiaries – with each sector exporting more than a billion dollars. These products would now have to pay tariffs to enter the US market. It may be mentioned that the tariffs on these products is below 3 per cent for nearly a fourth of the total, which are usually called “nuisance tariffs” because they effectively provide no protection to the domestic industry. But, these tariffs could cause considerable “nuisance” to the exporters in the form of procedural formalities that would have to be thoroughly reviewed. This would increase the cost of the transaction with regard to exporting to the US. (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Decoding the GSP puzzle

One of the disquieting aspects of India’s foreign trade is the rapidly growing imbalance with China, its largest trade partner.&nbsp;

This is an issue that has reverberated repeatedly through the concerns raised by a number of sectoral interests, the textiles industry being one of the more recent ones having petitioned the government for higher tariffs in order to protect their sector.&nbsp;

At the same time, however, there seems to be very little, if any, overall understanding about the implications of the imbalance in India-China trade, specifically the growing penetration of the Chinese products in the Indian economy.

In order to put the India-China trade imbalance in perspective, it necessary to see how the trade policies of the two neighbours have evolved since the beginning of this millennium.&nbsp;

This cut-off has a special significance for China; it became a member of the World Trade Organization (WTO) in 2001. With this step, China realised the goal of almost fully integrating with the global economy, which was set after Deng Xiaoping brought the country out of its isolation and triggered the process of economic reforms in 1978.&nbsp;

That a confident China had emerged following its WTO accession was to be proven by its trade performance in the 2000s. Before it joined the WTO, China’s share in global exports had not reached 4 per cent, but by 2006, the share had doubled and by the end of the decade it was 10 per cent. These were definite signs that China had the momentum to capture global markets.

India, on the other hand, fast-tracked its trade liberalisation agenda by the turn of the millennium. The trigger for doing so was provided by India’s accession to the Information Technology Agreement (ITA) in 1998, under which commitments were taken to eliminate tariffs on information technology products by 2005.&nbsp;

Alongside, a decision was taken to unilaterally lower tariffs on most manufacturing products, which incidentally coincided with the phase of high growth. Thus, average tariffs on industrial products, which was 31 per cent in 2000-01, was slashed to less than 12 per cent by 2006.&nbsp;

It is pertinent to note here that this sharp decline in the levels of tariffs happened when the National Manufacturing Competitiveness Council (NMCC), which was established by the UPA Government in 2004, sounded alarm bells over the near stagnant share of manufacturing.&nbsp;

In its “The National Strategy for Manufacturing” unveiled in 2006, the NMCC argued that “one of the major reasons for the reduced level of contribution by manufacturing has been the inability of the country to build and maintain competitiveness needed to meet the global challenges as well as to develop a larger domestic market through low-cost production”.&nbsp;

To this day, and after several initiatives to make the manufacturing sector more competitive in the past 12 years, NMCC’s observation remains true.

How have the India-China trade dynamics played out since the early 2000s? Before India began its deep tariff cuts, China was outside the list of top five import sources for India, having a share of less than 3 per cent in India’s total imports.&nbsp;

In 2000-01, India’s imports were $1.5 billion and exports were $831 million, and the trade deficit was a modest $671 million. Imports from China recorded a dramatic increase from 2003-04, up from $4 billion to $32 billion in 2008-09. By 2014-15, Chinese imports were above $60 billion, and in the previous financial year, it had exceeded $76 billion.&nbsp;

On the other hand, India’s exports to China remained extremely sluggish, which was hardly surprising in light of the comments by NMCC. From $3 billion in 2003-04, exports reached $10 billion in 2007-08. In 2012-13, Indian exports peaked at $18 billion, but five years thereafter it could export no more than $13 billion.&nbsp;

Consequently, the trade deficit expanded drastically to over $63 billion in 2017-18. In 2016-17, India’s trade deficit with China accounted for over 47 per cent of its overall trade deficit; declining a tad in the following year.

More than the increase in imports, it is its composition of trade that is of serious concern. China has targeted the Indian market primarily in two commodity groups, namely electrical and electronic equipment and pharmaceuticals.&nbsp;

Almost 60 per cent of India’s import requirements of electrical and electronic equipment were met by China, and more than 75 per cent of the active pharmaceutical ingredient, the raw material used by India’s generic pharmaceutical industry, were imported from China.&nbsp;

In 2017-18, China supplied 80 per cent of the antibiotics imported by India, besides supplying the bulk of electronic products and components.&nbsp;

Clearly, some of the key sectors of the Indian economy are critically dependent on China. In sharp contrast, India’s top exports were mostly intermediate products and raw materials. These included cathodes, petroleum oils, intermediate products for the producing films, plastic and iron ore and concentrates.

The United Nations Commodity Trade Statistics database provides a useful way of assessing the pattern of trade between countries by classifying trade flows by the levels of technology and production sectors.&nbsp;

According to the figures from this database for 2017, manufactured products constituted 55 per cent of India’s non-oil exports to China, while the corresponding figure for China was as high as 95 per cent.

This implies that primary commodities were a significant share of India’s exports to its largest trade partner, which is consistent with China’s strategy to function as the “factory of the world” by sourcing raw materials from its trading partners.&nbsp;

But for India, this pattern of trade is reminiscent of its colonial past, when Britain fuelled its industries by exploiting its colonies and used the latter as captive markets for its finished products. 
 
(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-the-ultimate-captive-market-2710618">original article)</a>

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

 
&nbsp;

One of the disquieting aspects of India’s foreign trade is the rapidly growing imbalance with China, its largest trade partner. This is an issue that has reverberated repeatedly through the concerns raised by a number of sectoral interests, the textiles industry being one of the more recent ones having petitioned the government for higher tariffs in order to protect their sector.

One of the disquieting aspects of India’s foreign trade is the rapidly growing imbalance with China, its largest trade partner. This is an issue that has reverberated repeatedly through the concerns raised by a number of sectoral interests, the textiles industry being one of the more recent ones having petitioned the government for higher tariffs in order to protect their sector. At the same time, however, there seems to be very little, if any, overall understanding about the implications of the imbalance in India-China trade, specifically the growing penetration of the Chinese products in the Indian economy. In order to put the India-China trade imbalance in perspective, it necessary to see how the trade policies of the two neighbours have evolved since the beginning of this millennium. This cut-off has a special significance for China; it became a member of the World Trade Organization (WTO) in 2001. With this step, China realised the goal of almost fully integrating with the global economy, which was set after Deng Xiaoping brought the country out of its isolation and triggered the process of economic reforms in 1978. That a confident China had emerged following its WTO accession was to be proven by its trade performance in the 2000s. Before it joined the WTO, China’s share in global exports had not reached 4 per cent, but by 2006, the share had doubled and by the end of the decade it was 10 per cent. These were definite signs that China had the momentum to capture global markets. India, on the other hand, fast-tracked its trade liberalisation agenda by the turn of the millennium. The trigger for doing so was provided by India’s accession to the Information Technology Agreement (ITA) in 1998, under which commitments were taken to eliminate tariffs on information technology products by 2005. Alongside, a decision was taken to unilaterally lower tariffs on most manufacturing products, which incidentally coincided with the phase of high growth. Thus, average tariffs on industrial products, which was 31 per cent in 2000-01, was slashed to less than 12 per cent by 2006. It is pertinent to note here that this sharp decline in the levels of tariffs happened when the National Manufacturing Competitiveness Council (NMCC), which was established by the UPA Government in 2004, sounded alarm bells over the near stagnant share of manufacturing. In its “The National Strategy for Manufacturing” unveiled in 2006, the NMCC argued that “one of the major reasons for the reduced level of contribution by manufacturing has been the inability of the country to build and maintain competitiveness needed to meet the global challenges as well as to develop a larger domestic market through low-cost production”. To this day, and after several initiatives to make the manufacturing sector more competitive in the past 12 years, NMCC’s observation remains true. How have the India-China trade dynamics played out since the early 2000s? Before India began its deep tariff cuts, China was outside the list of top five import sources for India, having a share of less than 3 per cent in India’s total imports. In 2000-01, India’s imports were $1.5 billion and exports were $831 million, and the trade deficit was a modest $671 million. Imports from China recorded a dramatic increase from 2003-04, up from $4 billion to $32 billion in 2008-09. By 2014-15, Chinese imports were above $60 billion, and in the previous financial year, it had exceeded $76 billion. On the other hand, India’s exports to China remained extremely sluggish, which was hardly surprising in light of the comments by NMCC. From $3 billion in 2003-04, exports reached $10 billion in 2007-08. In 2012-13, Indian exports peaked at $18 billion, but five years thereafter it could export no more than $13 billion. Consequently, the trade deficit expanded drastically to over $63 billion in 2017-18. In 2016-17, India’s trade deficit with China accounted for over 47 per cent of its overall trade deficit; declining a tad in the following year. More than the increase in imports, it is its composition of trade that is of serious concern. China has targeted the Indian market primarily in two commodity groups, namely electrical and electronic equipment and pharmaceuticals. Almost 60 per cent of India’s import requirements of electrical and electronic equipment were met by China, and more than 75 per cent of the active pharmaceutical ingredient, the raw material used by India’s generic pharmaceutical industry, were imported from China. In 2017-18, China supplied 80 per cent of the antibiotics imported by India, besides supplying the bulk of electronic products and components. Clearly, some of the key sectors of the Indian economy are critically dependent on China. In sharp contrast, India’s top exports were mostly intermediate products and raw materials. These included cathodes, petroleum oils, intermediate products for the producing films, plastic and iron ore and concentrates. The United Nations Commodity Trade Statistics database provides a useful way of assessing the pattern of trade between countries by classifying trade flows by the levels of technology and production sectors. According to the figures from this database for 2017, manufactured products constituted 55 per cent of India’s non-oil exports to China, while the corresponding figure for China was as high as 95 per cent. This implies that primary commodities were a significant share of India’s exports to its largest trade partner, which is consistent with China’s strategy to function as the “factory of the world” by sourcing raw materials from its trading partners. But for India, this pattern of trade is reminiscent of its colonial past, when Britain fuelled its industries by exploiting its colonies and used the latter as captive markets for its finished products. (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

How have India-China trade dynamics played out since early 2000s

The year 2018 has been an exceptional year for India-US economic relations. Trade tensions triggered by protectionist measures taken by the US Administration following the show of aggressive intent by President Donald Trump against the major economies, has left India in a piquant situation.

While several of those targeted have either adopted retaliatory measures or have decided to concede ground to the largest economic power, India seems to have been caught between the imperatives of maintaining a policy of non-confrontation with its strategic partner, on the one hand, and to protect the interests of domestic manufacturing industry, especially when the industry is facing some of the most serious challenges.

In March, President Trump announced his decision to block imports by imposing “reciprocal tax” against countries using tariffs on American products. The objective was to trigger the revival of the American manufacturing sector. Through a Presidential Proclamation, import tariffs of 25 per cent and 10 per cent were imposed on steel and aluminium, by invoking the provisions of Section 232 of the Trade Expansion Act of 1962. This provision allows the Administration to take measures to protect domestic industries for “national defence” and “national security”.

India was among the countries adversely affected by increased import tariffs on steel and aluminium. Indian exporters faced an additional burden of $241 million arising from the proposed import duties, which was nearly 20 per cent of their export realisations in calendar year 2017.

Until 2015-16, the United States was one of the largest markets for the Indian industry, with an export share of above 8 per cent. In the subsequent years, exports declined precipitously, and the export share dipped to less than half in the subsequent years.

With its exports to one of the world’s largest steel markets already on a down-hill, Indian steel industry, thus faced an uncertain future.

Like most affected countries, India tried to initiate negotiations with the US government by announcing retaliatory measures. In May, India submitted a notification in the WTO, indicating that tariffs on 20 products imported from the US would be increased.

Included in this list were agricultural products like soya beans and palmolein, and the American icon, Harley Davidson motorcycles. In a later notification in June, India increased the list to 30 products, but subsequently, Harley Davidson was taken off the list.

Although the increase in import duties were to take effect from August 4, this action was deferred, presumably because of the two-by-two dialogue between India and the US, which was held in the third week of August.

While India’s position has been to find a negotiated solution to the trade frictions, the US Administration has adopted an aggressive stance towards India and other trade partners, which was underlined by President Trump.

Yet another evidence of this stance was the increase in anti-dumping actions against India in 2018. Until mid-November, the US Customs and Border Protection had taken anti-dumping actions against 27 products exported by India, the highest in recent years.

Interestingly, a majority of these products included those from the iron and steel industry. This shows that the injury to the Indian industry that began with the tariff hikes in March, was heightened by the anti-dumping action.

The most recent of US actions against India was the Presidential Proclamation of October 30 (Proclamation 9813) “To Modify the List of Products Eligible for Duty-Free Treatment Under the Generalized System of Preferences”.

This Proclamation gave a list of products from the developing countries, which would not receive duty-free access into the United States market from November 1, 2018, that they had hitherto enjoyed under the Generalized System of Preferences (GSP).

The GSP was introduced in 1971 after the second session of the United Nations Conference on Trade and Development (UNCTAD) had unanimously adopted it in 1968. Under the GSP, developing countries’ exports were granted duty-free access by the developed countries. Developed countries thus granted unilateral trade concessions to the developing countries for increasing their exports.

The US Trade Administration annually reviews the GSP preferences, examining whether exports from developing countries conform to Competitive Need Limitations (CNL).

A developing country can lose its GSP benefits on any product if the CNLs are exceeded. Two measures are adopted for assessing CNLs: import of a product from a beneficiary developing country accounts for 50 per cent or more of the total imports of the product; or imports exceed a certain dollar value, which was set at $180 million in 2017.

Enforcement of CNLs is subject to waivers, the main being the de minimis waiver. This waiver sets a floor for the value of imported products below which CNLs cannot be enforced. In 2017, the floor was set at $23.5 million.

In its current year’s review, the US identified 94 products from 16 countries, which would lose GSP benefits from November 1, 2018. This list included 50 products imported from India, by far the largest number for any GSP beneficiary.

The list of products targeting imports from India are all relatively low-value products; more than half of the 50 products had import values of less than $1 million in 2017.

The product with the highest import value in 2017, hand-loomed carpet and other textile floor coverings, was just $10.3 million, way below the CNL threshold of $180 million. The Indian products for which US has withdrawn GSP benefits, clearly qualify for de minimis waiver, since their import values were below the threshold of $23.5 million in 2017.

It is time that the government of India protects the interests of the domestic manufacturing industry from the increasingly protectionist American Administration.

(This article was originally published on DNA. Read the <a href="https://www.dnaindia.com/analysis/column-battling-against-us-protectionism-2687311">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

The year 2018 has been an exceptional year for India-US economic relations. Trade tensions triggered by protectionist measures taken by the US Administration following the show of aggressive intent by President Donald Trump against the major economies, has left India in a piquant situation.

The year 2018 has been an exceptional year for India-US economic relations. Trade tensions triggered by protectionist measures taken by the US Administration following the show of aggressive intent by President Donald Trump against the major economies, has left India in a piquant situation. While several of those targeted have either adopted retaliatory measures or have decided to concede ground to the largest economic power, India seems to have been caught between the imperatives of maintaining a policy of non-confrontation with its strategic partner, on the one hand, and to protect the interests of domestic manufacturing industry, especially when the industry is facing some of the most serious challenges. In March, President Trump announced his decision to block imports by imposing “reciprocal tax” against countries using tariffs on American products. The objective was to trigger the revival of the American manufacturing sector. Through a Presidential Proclamation, import tariffs of 25 per cent and 10 per cent were imposed on steel and aluminium, by invoking the provisions of Section 232 of the Trade Expansion Act of 1962. This provision allows the Administration to take measures to protect domestic industries for “national defence” and “national security”. India was among the countries adversely affected by increased import tariffs on steel and aluminium. Indian exporters faced an additional burden of $241 million arising from the proposed import duties, which was nearly 20 per cent of their export realisations in calendar year 2017. Until 2015-16, the United States was one of the largest markets for the Indian industry, with an export share of above 8 per cent. In the subsequent years, exports declined precipitously, and the export share dipped to less than half in the subsequent years. With its exports to one of the world’s largest steel markets already on a down-hill, Indian steel industry, thus faced an uncertain future. Like most affected countries, India tried to initiate negotiations with the US government by announcing retaliatory measures. In May, India submitted a notification in the WTO, indicating that tariffs on 20 products imported from the US would be increased. Included in this list were agricultural products like soya beans and palmolein, and the American icon, Harley Davidson motorcycles. In a later notification in June, India increased the list to 30 products, but subsequently, Harley Davidson was taken off the list. Although the increase in import duties were to take effect from August 4, this action was deferred, presumably because of the two-by-two dialogue between India and the US, which was held in the third week of August. While India’s position has been to find a negotiated solution to the trade frictions, the US Administration has adopted an aggressive stance towards India and other trade partners, which was underlined by President Trump. Yet another evidence of this stance was the increase in anti-dumping actions against India in 2018. Until mid-November, the US Customs and Border Protection had taken anti-dumping actions against 27 products exported by India, the highest in recent years. Interestingly, a majority of these products included those from the iron and steel industry. This shows that the injury to the Indian industry that began with the tariff hikes in March, was heightened by the anti-dumping action. The most recent of US actions against India was the Presidential Proclamation of October 30 (Proclamation 9813) “To Modify the List of Products Eligible for Duty-Free Treatment Under the Generalized System of Preferences”. This Proclamation gave a list of products from the developing countries, which would not receive duty-free access into the United States market from November 1, 2018, that they had hitherto enjoyed under the Generalized System of Preferences (GSP). The GSP was introduced in 1971 after the second session of the United Nations Conference on Trade and Development (UNCTAD) had unanimously adopted it in 1968. Under the GSP, developing countries’ exports were granted duty-free access by the developed countries. Developed countries thus granted unilateral trade concessions to the developing countries for increasing their exports. The US Trade Administration annually reviews the GSP preferences, examining whether exports from developing countries conform to Competitive Need Limitations (CNL). A developing country can lose its GSP benefits on any product if the CNLs are exceeded. Two measures are adopted for assessing CNLs: import of a product from a beneficiary developing country accounts for 50 per cent or more of the total imports of the product; or imports exceed a certain dollar value, which was set at $180 million in 2017. Enforcement of CNLs is subject to waivers, the main being the de minimis waiver. This waiver sets a floor for the value of imported products below which CNLs cannot be enforced. In 2017, the floor was set at $23.5 million. In its current year’s review, the US identified 94 products from 16 countries, which would lose GSP benefits from November 1, 2018. This list included 50 products imported from India, by far the largest number for any GSP beneficiary. The list of products targeting imports from India are all relatively low-value products; more than half of the 50 products had import values of less than $1 million in 2017. The product with the highest import value in 2017, hand-loomed carpet and other textile floor coverings, was just $10.3 million, way below the CNL threshold of $180 million. The Indian products for which US has withdrawn GSP benefits, clearly qualify for de minimis waiver, since their import values were below the threshold of $23.5 million in 2017. It is time that the government of India protects the interests of the domestic manufacturing industry from the increasingly protectionist American Administration. (This article was originally published on DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Battling against US protectionism

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