Trump rescinds preferential trade treatment for India

A worker sleeping under an embroidery machine in a workshop in Mumbai. The United States' decision to end preferential trade treatment for India comes as official figures show India's growth slowing for the third straight quarter to 5.8 per cent in J
A worker sleeping under an embroidery machine in a workshop in Mumbai. The United States' decision to end preferential trade treatment for India comes as official figures show India's growth slowing for the third straight quarter to 5.8 per cent in January-March, while unemployment hit a 45-year high last year.PHOTO: REUTERS

Move a blow for re-elected Modi, adds to Delhi's economic woes

WASHINGTON • The US will end preferential trade treatment for India from Wednesday.

Announcing this late on Friday, in a fresh economic headwind for New Delhi alongside slowing growth and record unemployment, President Donald Trump said he wanted greater access for US goods to India.

"I have determined that India has not assured the United States that it will provide equitable and reasonable access to its markets," Mr Trump said in a statement.

"Accordingly, it is appropriate to terminate India's designation as a beneficiary developing country."

The giant South Asian nation has been the single biggest beneficiary of the decades-old US Generalised System of Preferences programme, allowing it to export US$5.7 billion (S$7.8 billion) worth of duty-free goods in 2017, according to figures from the US Congress, reported Agence France-Presse.

Mr Trump had announced in March that he would be ending the preferential trade accord with India, but did not give a date.

The US, which had a US$26.7 billion trade deficit with India in 2017-2018, has sought to make India a closer diplomatic ally, but has long complained about limited access to the huge market of 1.3 billion people.

NO MORE PREFERENTIAL TREATMENT

I have determined that India has not assured the United States that it will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India's designation as a beneficiary developing country.

U.S. PRESIDENT DONALD TRUMP

The announcement is the latest headwind to threaten the Hindu nationalist government led by Prime Minister Narendra Modi, who was re-elected to his second term in a landslide win just weeks ago, after campaigning partly on his record as an economic reformer.

Official figures released on Friday showed that India's growth slowed for the third straight quarter to 5.8 per cent in January-March, while unemployment hit a 45-year high last year.

India said yesterday that it had offered resolutions to the US during bilateral trade discussions, and it is "unfortunate" that those were not accepted, reported Bloomberg.

While the country will continue to work on improving ties with the US, its trade decisions would be guided by its own "development imperatives and concerns", said a statement from its Trade Ministry.

Media reports said New Delhi was considering higher import duties on more than 20 US products, including agricultural goods as well as chemicals.

Meanwhile, Japan's chief trade negotiator Toshimitsu Motegi has called for cool heads to prevail in what has effectively become an "escalation of tariff hikes" that will hurt the global economy.

Mr Motegi, who is Economic Revitalisation Minister, is Japan's point man for trade talks with the US. He told the 25th Nikkei Future of Asia conference on Friday that trade disputes ought to be resolved by "finding a solution based on rules and consultation".

 
 

Even Japan, the third-largest economy in the world, will not escape unscathed, Mr Motegi said, noting that the US-China trade war is proving to be detrimental to the world economy and has already caused weakened business sentiment in Tokyo.

Japan and the US remain far apart on trade too, Mr Motegi had said after a meeting with US Trade Representative Robert Lighthizer in Tokyo on May 25.

The Japan-US trade quagmire is centred on two key issues: motor vehicles and agriculture.

To address Japan's US$67.6 billion trade surplus with the US, Washington has threatened its stalwart security ally that it will raise tariffs on cars and vehicle parts to 25 per cent on national security grounds, much to the bewilderment of Tokyo.

The US wants lower tariffs on farm products. But Japan is reluctant to give more concessions than what it has already agreed in mega-trade deals like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Even so, Mr Motegi told the forum that he was hopeful Japan and the US will eventually iron out their differences, though he foresees "very strict negotiations where there will be a collision in national interests".

This year's two-day Nikkei Future of Asia forum, themed Seeking A New Global Order - Overcoming The Chaos, looked at the deepening global uncertainties given the US-China trade war as well as military and security tensions in technology and the South China Sea.

The Straits Times is a media partner of the annual event.

A version of this article appeared in the print edition of The Sunday Times on June 02, 2019, with the headline 'Trump rescinds preferential trade treatment for India'. Print Edition | Subscribe