GSP Advocate Says US Decision on India May Not Be Last Word
The tone of both the U.S. and Indian governments on the termination of India from Generalized System of Preferences benefits leaves the door open for at least partial re-entry, said Dan Anthony, who manages the Coalition for GSP, in a March 5 interview. The letter President Donald Trump sent to Congress said, "I will continue to assess whether the Government of India is providing equitable and reasonable access to its markets." The Indian Ministry of Commerce and Industry said, "India was agreeable to a very meaningful mutually acceptable package ... while keeping remaining issues under discussion in the future." The Commerce Ministry said India wanted to take a "suitable trade margin approach" to medical devices, and that it was open to "the requested simplified dairy certification procedure," to deal with the fact that American cows are fed animal-derived blood meal.
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However, The Associated Press quoted the Commerce Ministry spokeswoman as saying, "The GSP benefits will go, the U.S. will not relent on this." India noted that while it was medical device interests and dairy exporters who challenged India's participation in the GSP, U.S. trade officials used the review to bring up other issues, like telecom testing, information technology tariffs, and market access for alfalfa hay, cherries and pork.
"India was able to offer a very meaningful way forward on almost all the US requests," the ministry said. "In a few instances, specific US requests were not found reasonable and doable at this time by the departments concerned, in light of public welfare concerns reflective of India's developing country status and its national interest."
If the termination stands, Anthony said it would diminish the value of GSP a lot -- about a quarter of all GSP duty savings are on Indian imports, he said. He estimated it at $250 billion, while the India estimated it at $190 million. Anthony said the most common imports from India are chemicals that are made into herbicides and pesticides; auto parts; leather wallets, belts and travel goods; and stone used for counters. While he said he understood the U.S. trade representative's hope that withdrawing GSP could move India on dairy access, he said, "I haven’t met too many people who think that’s a plausible outcome. It is purely a hope that maybe this changes things, but it’s an expensive experiment for companies.
"If the U.S. takes GSP away for India, American companies pay a higher tariff on a pretty small share of Indian imports," he said. GSP-covered items are about 12 percent of India's exports to the U.S. "This idea that you would overturn, say, thousands of years of religious issues associated with dairy cows for that is just a misunderstanding of what type of leverage GSP might provide."
Anthony said all the companies importing from India with GSP that called him on March 5 have fewer than 25 employees. While some of the tariffs that would come back are low -- auto parts are at 2.5 percent -- leather goods are taxed at 8 percent, and some of the food imports are at 11 percent or 12 percent.
In many cases, the alternative importer will be China, and he said those exporters are the ones in a better position today, not U.S. exporters. "To the extent that getting countries to shift out of China is an administration goal, this would undermine it a bit," he said.
Anthony said he couldn't guess how likely it would be that India would make a concession in the next two months that would lead to at least a partial reversal of the U.S. decision. India has never implemented its list of retaliatory tariffs for Section 232 tariffs on steel and aluminum, and if they put those into place, reconciliation is not happening. "You could see a series of announcements on either side that they’re negotiating to resolve it, or make it pretty clear that this is spiraling out of control."
Turkey is the other GSP source of stone for countertops, and it also exports a lot of chemicals, as well as candy. Because the U.S. announced that Turkey has become too developed to deserve inclusion, he doesn't think the decision will change. By tariff savings, Turkey is the seventh-largest beneficiary of the program.
He said businesses may not want to find chemical suppliers in Thailand or Indonesia -- who are also covered by GSP -- because they are also under review. Anthony said the businesses in his coalition will argue to the administration that without GSP, American businesses cut staff. "Whether that moves the needle is a different question," he said.