These are unpredictable times for international relations, especially with populists leaders in power like Donald Trump. On one end, Trump is engaged in talks with North Korea, while on the other end he is on a trade war with China. And that trade war now has come to our doors.
US President Donald Trump is planning to end preferential trade treatment with India.
In his letter to Congressional leaders, Trump said, “I am taking this step because, after the intensive engagement between the United States and the Government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India.”
This preferential treatment for India was done under the GSP (Generalised System of Preference).
What is Generalised system of Preference?
It is a programme run in many developed countries/group of countries to help poor/developing countries of cutting tariffs/taxes of imports. In simple words, if a poor country exports its goods to a developed country, it may face heavy taxes at the border. But with GSP, taxes are cut down to help those countries.
Developed countries like the United States, the United Kingdom, and the European Union give GPSs to many countries.
Why is Trump planning to exempt India from it?
Trump administration has passed the Reciprocal Trade Act in Congress in America. And according to that act, the US will keep a balance sheet with other nations. In simple words – Tit for Tat. US is paying heavy duties for exporting goods to India, while India is getting GSP.
Here is what Trump said to US media on Jan 25 this year, “Look at motorcycles as an example. (In) India, it was 100 per cent. I got them down to 50 per cent, just by talking for about two minutes.
India has a very high tariff. They charge a lot of tariffs. You look at whisky... India gets 150 per cent, we get nothing."
Earlier US had a motto of leading the world, helping the other countries (even if they don’t want) but Trump’s foreign policies are more of inward looking. He is just trying to ‘Make America Great Again’.
What will India lose?
India exports goods of 5.6 billion dollars to the US under the GSP. But the actual benefit gained by India is around 250 million dollars. And that is not a huge amount when it comes to large economies like India. However, in the long run, it is not good for India-US relations, as India was the largest beneficiary of GSP.