In early March 2019, President Donald Trump, announced that he would withdraw duty benefits on all imports from India. These benefits had been offered under the Generalised System of Preferences (GSP), a programme that allows duty-free imports of specified goods from beneficiary countries. &nbsp;

The scheme, introduced in 1974, was intended as a way of helping developing nations as well as giving the US manufacturers access to cheap raw material. &nbsp;

The March announcement should not have come as a surprise to India. In November, the US withdrew GSP benefits to some 50 products from India. &nbsp;

Earlier in 2018, the Office of the US Trade Representative (USTR) had begun an eligibility review of India, based on complaints received from US dairy associations and the medical technology association. &nbsp;

The trigger for these trade bodies to focus on India was because India had made it difficult for them to enter the market. &nbsp;

In the case of dairy, India had asked dairy importers to certify their products as being from livestock that had not been fed animal parts. &nbsp;

The reason for this is that dairy products in India are often used in religious rites, and need to be ritually “pure”. &nbsp;

Medical technology companies, meanwhile, have been hit hard by the Indian government providing heavy subsidies on medical equipment in order to make such equipment easily accessible. This “populist” move has meant that American companies cannot charge a premium on their products.

According to the USTR, beneficiary countries under GSP are expected to provide “equitable and reasonable access to its markets” to US companies. &nbsp;

India, however, has imposed several measures that the US considers protectionist, including the two steps mentioned above. &nbsp;

What does this mean for Indian exports? According to the government, very little. &nbsp;

Official sources have downplayed the impact of GSP removal. The numbers they quote seem convincing -- Indian exports to the US are valued at $5.6 billion; Indian trade authorities say that GSP covers some $190 million worth of exports and so the impact of removing India from GSP will be minimal. But any negative impact could hit the country’s balance of trade, and a big trade deficit will hit the GDP. 
 
Exporters will also take a hit. Small and medium enterprises (SMEs) form the bulk of exporters who benefit under GSP, and having to pay duty on their goods could prove too expensive for them. &nbsp;

Many of these exporters are in labour-intensive industries, so if they go out of business, it could hit the labour market as well. Leather and footwear, chemicals, and bulk drugs will be the sectors most affected.

On the whole, other exports will not feel the pinch. However, the fear is that once the US has used GSP as a stick, it will make other exports from India unviable. &nbsp;

In the case of seafood, the US has already imposed stringent import regulations; given that the bulk of Indian seafood exports is to the US, these norms will hit India hard. &nbsp;

There’s also the possibility of the US imposing or increasing anti-dumping duties on a range of other goods.

The impact on exporters will likely be softened over the medium term as these players look at markets outside the US. While China and the US may both be closed to these exporters, there’s still a large market in the rest of the world. &nbsp;

Judging by the state of internal politics, and with elections coming up soon, the GSP issue may soon be buried or resolved to India’s benefit. &nbsp;

That’s because removing India from the GSP will mean that Indian goods will cost more in the US, which means that the cost of raw material for American industry could go up too.

Meanwhile, there are steps India can take to protect its exporters. For one, it can approach the World Trade Organisation. Under the Enabling Clause of the WTO’s General Agreement on Trade and Tariffs (to which both India and the US are signatories), developed countries can offer preferential treatment on a non-reciprocal basis. By removing India from the GSP on the grounds that the country isn’t providing access to its market, the US is violating this GATT clause. &nbsp;

India can take this matter to the WTO and, judging by a past victory against the European Union, win. 
 
(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-india-s-removal-from-gsp-new-delhi-can-move-wto-2740316">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.) 
&nbsp;

&nbsp;

In early March 2019, President Donald Trump, announced that he would withdraw duty benefits on all imports from India. These benefits had been offered under the Generalised System of Preferences (GSP), a programme that allows duty-free imports of specified goods from beneficiary countries.

In early March 2019, President Donald Trump, announced that he would withdraw duty benefits on all imports from India. These benefits had been offered under the Generalised System of Preferences (GSP), a programme that allows duty-free imports of specified goods from beneficiary countries. The scheme, introduced in 1974, was intended as a way of helping developing nations as well as giving the US manufacturers access to cheap raw material. The March announcement should not have come as a surprise to India. In November, the US withdrew GSP benefits to some 50 products from India. Earlier in 2018, the Office of the US Trade Representative (USTR) had begun an eligibility review of India, based on complaints received from US dairy associations and the medical technology association. The trigger for these trade bodies to focus on India was because India had made it difficult for them to enter the market. In the case of dairy, India had asked dairy importers to certify their products as being from livestock that had not been fed animal parts. The reason for this is that dairy products in India are often used in religious rites, and need to be ritually “pure”. Medical technology companies, meanwhile, have been hit hard by the Indian government providing heavy subsidies on medical equipment in order to make such equipment easily accessible. This “populist” move has meant that American companies cannot charge a premium on their products. According to the USTR, beneficiary countries under GSP are expected to provide “equitable and reasonable access to its markets” to US companies. India, however, has imposed several measures that the US considers protectionist, including the two steps mentioned above. What does this mean for Indian exports? According to the government, very little. Official sources have downplayed the impact of GSP removal. The numbers they quote seem convincing -- Indian exports to the US are valued at $5.6 billion; Indian trade authorities say that GSP covers some $190 million worth of exports and so the impact of removing India from GSP will be minimal. But any negative impact could hit the country’s balance of trade, and a big trade deficit will hit the GDP. Exporters will also take a hit. Small and medium enterprises (SMEs) form the bulk of exporters who benefit under GSP, and having to pay duty on their goods could prove too expensive for them. Many of these exporters are in labour-intensive industries, so if they go out of business, it could hit the labour market as well. Leather and footwear, chemicals, and bulk drugs will be the sectors most affected. On the whole, other exports will not feel the pinch. However, the fear is that once the US has used GSP as a stick, it will make other exports from India unviable. In the case of seafood, the US has already imposed stringent import regulations; given that the bulk of Indian seafood exports is to the US, these norms will hit India hard. There’s also the possibility of the US imposing or increasing anti-dumping duties on a range of other goods. The impact on exporters will likely be softened over the medium term as these players look at markets outside the US. While China and the US may both be closed to these exporters, there’s still a large market in the rest of the world. Judging by the state of internal politics, and with elections coming up soon, the GSP issue may soon be buried or resolved to India’s benefit. That’s because removing India from the GSP will mean that Indian goods will cost more in the US, which means that the cost of raw material for American industry could go up too. Meanwhile, there are steps India can take to protect its exporters. For one, it can approach the World Trade Organisation. Under the Enabling Clause of the WTO’s General Agreement on Trade and Tariffs (to which both India and the US are signatories), developed countries can offer preferential treatment on a non-reciprocal basis. By removing India from the GSP on the grounds that the country isn’t providing access to its market, the US is violating this GATT clause. India can take this matter to the WTO and, judging by a past victory against the European Union, win. (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.)

India-US trade bumps: New Delhi can move WTO on its removal from GSP

Top American lawmakers and experts have warned that imposition of sanctions on India under a newly-enacted law if it buys the S-400 air defence missile system from Russia could be disastrous for the Indo-US ties. Countering America’s Adversaries Through Sanctions Act (CAATSA), which was signed into law in August 2017 and went into effect in January this year, mandates the Trump administration to punish entities engaging in significant transaction with the defence or intelligence sectors of Russia.

At an event on the Capitol Hill, experts and lawmakers warned that any imposition of sanctions on India, which is now a major defence partner, could be disastrous for the bilateral relationship and as such there is an urgent need to prevent that from happening.

“I do think, it (CAATSA) is a serious issue that needs to be dealt. There needs to be a dialogue between the US and India. Our goal is not to sanction India,” Congressman Joe Crowley, House Democratic Caucus Chairman, said at the US-India Friendship event.

“But given the kind of destabilising activities Russia has been doing across the world in particular against democracies, it is important to slap sanctions against Russia,” he said. “But when it comes to those third-party agreements I think there has to be dialogue between the US and India understanding the needs that India has as a nation for self-defence as well that has to be taken into consideration,” Crowley said in response to a question.

India is currently in an advance stage of negotiations with Russia for five S-400 system worth an estimate USD 4.5 billion. The S-400 Triumf long-range air defence missile system has the capability to destroy incoming hostile aircraft, missiles and even drones at ranges of up to 400 km. The S-400 missile system can fire three types of missiles and simultaneously engage 36 targets, thereby creating a layered defence.

Flagging the issue, Nisha Desai Biswal, the former Assistant Secretary of State for South and Central Asia and the current president of the US India Business Council said that CAATSA sanctions is something that members of Congress need to be “really critically aware” of and thinking through as they deal with the intention around the Russia Sanctions legislation.

“It is something that we are all mindful of and looking at very very carefully. But I do think that we need to acknowledge and address the continuing importance for India of its relationship with Russia and how we how we manage the way forward on that issue,” Biswal said.

CAATSA sanctions would “damage” US-India relationship, warned Keith Webster, who represented Pentagon in the Defense Trade and Technology Initiative (DTTI) in the previous Obama Administration. He is currently president of the defence and aerospace export council US Chamber of Commerce.

Observing that the purpose of this legislation is certainly not to target India, Benjamin Schwartz who leads the US-India Business Council’s Defence and Aerospace programme, said one of the unintended consequences of two words “significant transactions” in that legislation is that it’s exacerbated some of the concerns about the US as a reliable security provider.

The legislation says that if a significant transaction takes place with the Russian defence or intelligence services that country or that entity is subject to potential US sanctions. There is a potential of a waiver to take place at the presidential level, Schwartz said.

“I say this is unintended because the only country or at least the country that would benefit the very most from any type of sanctions from the United States on India would be Russia. So that was clearly not the intention of this legislation. I personally don’t think that the US Congress or the US government would ultimately follow through with that kind of situation because that wasn’t the intention of the legislation.”

But one of the challenges that we faced in promoting US India defence relationship is demonstrating that the US is a reliable partner of India. So all efforts should be “on trying to eliminate any of the ambiguity or the uncertainty that that legislative language may be creating,” Schwartz said.

Experts and lawmakers warned that any imposition of sanctions on India, which is now a major defence partner, could be disastrous for the bilateral relationship and as such there is an urgent need to prevent that from happening.

Top American lawmakers and experts have warned that imposition of sanctions on India under a newly-enacted law if it buys the S-400 air defence missile system from Russia could be disastrous for the Indo-US ties. Countering America’s Adversaries Through Sanctions Act (CAATSA), which was signed into law in August 2017 and went into effect in January this year, mandates the Trump administration to punish entities engaging in significant transaction with the defence or intelligence sectors of Russia. At an event on the Capitol Hill, experts and lawmakers warned that any imposition of sanctions on India, which is now a major defence partner, could be disastrous for the bilateral relationship and as such there is an urgent need to prevent that from happening. “I do think, it (CAATSA) is a serious issue that needs to be dealt. There needs to be a dialogue between the US and India. Our goal is not to sanction India,” Congressman Joe Crowley, House Democratic Caucus Chairman, said at the US-India Friendship event. “But given the kind of destabilising activities Russia has been doing across the world in particular against democracies, it is important to slap sanctions against Russia,” he said. “But when it comes to those third-party agreements I think there has to be dialogue between the US and India understanding the needs that India has as a nation for self-defence as well that has to be taken into consideration,” Crowley said in response to a question. India is currently in an advance stage of negotiations with Russia for five S-400 system worth an estimate USD 4.5 billion. The S-400 Triumf long-range air defence missile system has the capability to destroy incoming hostile aircraft, missiles and even drones at ranges of up to 400 km. The S-400 missile system can fire three types of missiles and simultaneously engage 36 targets, thereby creating a layered defence. Flagging the issue, Nisha Desai Biswal, the former Assistant Secretary of State for South and Central Asia and the current president of the US India Business Council said that CAATSA sanctions is something that members of Congress need to be “really critically aware” of and thinking through as they deal with the intention around the Russia Sanctions legislation. “It is something that we are all mindful of and looking at very very carefully. But I do think that we need to acknowledge and address the continuing importance for India of its relationship with Russia and how we how we manage the way forward on that issue,” Biswal said. CAATSA sanctions would “damage” US-India relationship, warned Keith Webster, who represented Pentagon in the Defense Trade and Technology Initiative (DTTI) in the previous Obama Administration. He is currently president of the defence and aerospace export council US Chamber of Commerce. Observing that the purpose of this legislation is certainly not to target India, Benjamin Schwartz who leads the US-India Business Council’s Defence and Aerospace programme, said one of the unintended consequences of two words “significant transactions” in that legislation is that it’s exacerbated some of the concerns about the US as a reliable security provider. The legislation says that if a significant transaction takes place with the Russian defence or intelligence services that country or that entity is subject to potential US sanctions. There is a potential of a waiver to take place at the presidential level, Schwartz said. “I say this is unintended because the only country or at least the country that would benefit the very most from any type of sanctions from the United States on India would be Russia. So that was clearly not the intention of this legislation. I personally don’t think that the US Congress or the US government would ultimately follow through with that kind of situation because that wasn’t the intention of the legislation.” But one of the challenges that we faced in promoting US India defence relationship is demonstrating that the US is a reliable partner of India. So all efforts should be “on trying to eliminate any of the ambiguity or the uncertainty that that legislative language may be creating,” Schwartz said.

US should not sanction India over defence deal with Russia: American lawmakers

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India-US trade bumps: New Delhi can move WTO on its removal from GSP

US should not sanction India over defence deal with Russia: American lawmakers