A US decision to evict India from a key trade pact is a “done deal,” an official said Thursday, despite Washington’s desire for close relations with re-elected Prime Minister Narendra Modi. President Donald Trump’s administration said in March it was removing India from the Generalized System of Preferences, which gives favourable access to goods from developing countries.
India, which had been the top beneficiary of the deal under which it exported $5.6 billion to the United States in 2017, protested that it could make no counter-proposals due to laws that forbid policy-making during the election season.
Trump Acts against Trade Barriers
A senior US official voiced hope for warm relations with Modi after he led his Hindu nationalist party to an overwhelming re-election victory but said that the March decision would move forward.
The unnamed official stated, as reported by The Huffington Post India, “The persistent market access issues, which we were engaged with our Indian counterparts over the last year, led us to announce in March that we would be suspending or withdrawing India’s benefits under the generalised system of Preferences Program.”
Modi after he led his Hindu nationalist party to an overwhelming re-election victory but said that the March decision would move forward.
“I think that suspension was a done deal. Now the task is how do we look ahead, how do we work under the second Modi administration to identify a path forward,” the official said on condition of anonymity.
“We believe there is enormous potential to grow our trade relationship and to help stimulate the jobs that Prime Minister Modi has committed to bringing to an overwhelmingly young Indian population,” she said.
Read more: USA drags India to the WTO
The senior US official further added, “We believe that if India is prepared to address policies including data localisation and e-commerce measures that served to stifle international investment from top tier companies that we can continue to make significant progress moving forward.”
US Presses India to Loosen Regulations
The official said that India “remains one of the least open major economies in the world,” adding: “The Trump administration is committed to ensuring free, fair and reciprocal trade.”
The Trump administration said it was removing India from the GSP due to trade barriers and also terminating the status for Turkey on the grounds that it was no longer a developing country. Trump has taken a tough line on trade even with US allies and has been especially incensed at Indian tariffs on high-end manufactured goods such as motorcycles.
In another major sticking point in negotiations that led to the decision, the United States had pressed India to loosen regulations on the import of US dairy products. India had objected on cultural grounds as US cows are often fed blood meal from other cattle.
Trump has taken a tough line on trade even with US allies and has been especially incensed at Indian tariffs on high-end manufactured goods such as motorcycles.
As most Hindus do not eat beef, India unsuccessfully asked the US dairy industry to certify how the cows are fed. The official nonetheless said that the United States hoped to boost relations with Modi, including on defense cooperation.
Dr. Shama Mehmood, a member of the Indian National Congress, observed that this decision will affect $5.6 billion worth of India’s exports. She tweeted, “India’s economy is already in a slowdown. A big hit to exports will hamper growth even further.”
The US has made up its mind to end preferential trade status for India.
This decision will affect $5.6 billion worth of India's exports.
India's economy is already in slowdown. A big hit to exports will hamper growth even further.
— Shama Mohamed (@drshamamohd) May 31, 2019
Modi is scheduled to meet Trump in late June on the sidelines of a Group of 20 summit in Osaka.