JAKARTA – US President Donald Trump has announced his plans to fight what he calls the practice of unfair trade by ending trade preferences with India and Turkey.
Trump delivered the plan to Congress on Monday (4/3/2019) in his letter explaining the intention to end trade cooperation that benefits India and Turkey under the Generalized System of Preferences (GSP) program.
The US Trade Representative Office said that this policy would be effective at least 60 days after notification, and would be determined through the president’s proclamation.
India is the biggest beneficiary of this program in 2017 with a total export of US $ 5.7 billion to the US which is given duty free.
According to the Congress Research Service report released in January, Turkey is the fifth largest beneficiary with US $ 1.7 billion in total exports to the US.
Washington said in April 2018 that it would review the feasibility of India to continue to benefit from the GSP program after reports from several US companies that said the delivery of dairy products and medical devices to India was harmed by non-tariff barriers.
Richard Rossow, senior adviser and chairman of Wadhwani in the US-India policy study at CSIS, said that even though high-level talks had taken place last year, India showed little tendency to budge regarding tariff policies.
“Ideologically, I understand why the US feels the need to revoke the GSP. I hope this trade tension will not end and expand, because the impact can increase further in the coming days,” Rossow said as quoted by Bloomberg on Thursday (03/07/2019)
In a letter written by Trump to Congress, he mentioned that after intense discussions between the US and the Indian government, Trump said that India had not been able to convince the US that they could provide fair access to Indian markets.
The benefits of the fees received by India from exports under the GSP program according to Indian Minister of Trade Anup Wadhawan, are relatively limited at around US $ 190 million and the withdrawal will not have a significant impact.
Data from the Ministry of Commerce of India states that Indian goods exports to the US reached US $ 48 billion in 2018 or grew 13% on an annual basis.
Meanwhile India’s trade surplus of US $ 21 billion with the US made the treasury of the South Asian country in the list of supervision of currency manipulators.
To prevent a trade war with the US, India has postponed the imposition of retaliation tariffs on 29 imported goods in response to increases in import duties on various products. Exports were dampened amid a global slowdown and tariff war has added to risks in Asia’s third largest economy.
“India has solved the problem with the US, but there is additional demand to reduce tariffs,” Wadhawan said.
He added that the US $ 2.6 trillion economic country has more urgent priorities such as development issues and cannot compromise the affordability of medical equipment prices as one of the goods affected by tariffs.
In a separate letter, Trump said that Turkey was no longer a developing country based on its level of economic development.
Trump’s decision arrived at a difficult time for Indian Prime Minister Narendra Modi.
Modi will face general elections in the next few weeks, coupled with a situation that is heating up again with Pakistan causing clashes that could cause massive war.
At the same time, Trump has some disagreements with Turkish leader Recep Tayyip Erdogan. Turkey’s once strong economy has weakened, a condition that is likely to become a major problem in local elections at the end of the month.