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GSP for India in Danger as Trade Irritants Fester

Thursday, February 21, 2019
Sandler, Travis & Rosenberg Trade Report

A growing list of trade irritants has stalled U.S.-India trade talks and could prompt the White House to narrow or suspend India’s eligibility for duty-free exports to the U.S., according to press reports.

The Office of the U.S. Trade Representative is nearing the completion of a review of India’s eligibility for the Generalized System of Preferences, which reduces or suspends tariffs on thousands of goods imported from developing countries. Indian exports to the U.S. of about 2,000 different products with a value of about $5.6 billion currently qualify for duty-free treatment under GSP.

Press reports indicate that there is growing speculation that USTR could call for a change to India’s GSP benefits as part of an effort to convince New Delhi to reverse course on a number of trade issues. These include tougher rules on e-commerce marketplaces, efforts to force foreign companies to store data in India, and higher import tariffs on electronic products in apparent violation of India’s commitments under the World Trade Organization’s Information Technology Agreement. Most recently, the U.S. joined Canada in asserting that India has exceeded WTO-allowable subsidies for producers of chickpeas, pigeon peas, black matpe, mung beans, and lentils.

However, India has concerns of its own. Officials have expressed opposition to U.S. national security-related tariff increases on steel and aluminum and threatened to impose retaliatory duties on $240 million worth of U.S. exports, though they have delayed such action several times. Other problematic issues include tighter U.S. rules for granting visas to foreign workers and a U.S. proposal that would make it harder for India, China, and others to classify themselves as developing countries and thus obtain more flexible terms in WTO agreements.

The two sides had reportedly been working on a bilateral agreement to resolve these issues, but The Washington Post reports that talks have stalled because with key elections on the horizon “neither country is in the mood to compromise.”

In the meantime, Secretary of Commerce Wilbur Ross is seeking help from the business community, calling on attendees at a recent meeting of the U.S.-India CEO Forum to address India’s “new barriers to American business … with the goal of expanding our bilateral trade and investment ties.” Ross also urged the Indian government to “work with us to achieve reciprocity in trade, and to develop an equitable and level playing field for all businesses.”

For more information on U.S.-India trade issues, please contact Nicole Bivens Collinson at (202) 730-4956.

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