At the direction of President Donald Trump, US Trade Representative Robert Lighthizer announced that US intends to terminate India & Turkey's designations as Beneficiary Developing Countries under Generalized System of Preferences (GSP) programme.
File photo of United States president Donald Trump and Prime Minister Narendra Modi.
India is the world's largest beneficiary of the GSP program, which dates from the 1970s, and ending its participation would be the strongest punitive action for the South Asian nation since Trump took office in 2017.
It comes as the U.S. negotiates with China to resolve a damaging trade war.
The US trade representative said it intends to terminate India's and Turkey's designations as beneficiary developing countries under the GSP programme because they no longer comply with the statutory eligibility criteria.
He had first brought up the matter soon after taking office, during his inaugural address to a joint sitting of the US Congress in 2017, without directly naming India.
"GSP benefits are relatively limited", said commerce secretary Anup Wadhawan, adding that the benefits will be discontinued after 60 days. We have very deep routed ties with USA.
Most of the exports were intermediate goods not produced in the USA because they were low in the manufacturing value chain, it added. "GSP is more symbolic of the strategic relationship, not in value terms", another government official, requesting anonymity, told news agency Reuters.
Reacting to the move, a top Indian trade official said New Delhi does not plan to impose retaliatory tariffs on United States goods.
India reportedly enjoys preferential tariff on exports worth of almost $ 5.6 billion under the GSP route out of the total exports of $48 billion in 2017-18. Trump was cool to an Indian invitation to attend its annual Republic Day parade this year.
The benefit to industry is low, US tariffs are already low.
"It can become a political issue in an election year".
"Our proposal couldn't be workable for USA as India couldn't have compromised on affordability of medical devices", he said.
According to the U.S. Trade Representative's Office, the U.S. goods and services trade deficit with India was $27.3 billion in 2017. "Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion", the USTR said.
FILE PHOTO - A worker loads goods into a container at Thar Dry Port in Sanand in the western state of Gujarat, India, February 10, 2016.
Although Trump told United States lawmakers in his letter that he will "continue to assess whether the Government of India is providing equitable and reasonable access to its markets", and the withdrawal will kick in only after 60 days through a presidential proclamation, there is little chance of any deal being salvaged in the two month window.
Under an agreement taking shape, Beijing would lower some barriers on USA companies' operations in China and purchase large amounts American agricultural and energy goods if the United States lowered most of the tariffs in return.