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India out of US’ developing nations list for trade benefits

India was one of the countries that were eliminated from the privileged list early this week.

, ET Bureau|
Last Updated: Feb 12, 2020, 11.58 AM IST
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The US removed India from the list on account of it being a G-20 member and having a share of 0.5% or more of world trade.
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New Delhi: Ahead of President Donald Trump’s visit on February 24-25, the US on Monday removed India from its list of developing countries that are exempt from investigations into whether they harm American industry with unfairly subsidised exports.

The United States Trade Representative (USTR) eliminated a host of countries including Brazil, Indonesia, Hong Kong, South Africa and Argentina from getting special preferences under the methodology for countervailing duty (CVD) investigations, stating that the previous guidance that dated back to 1998 “is now obsolete”.

The US removed India from the list on account of it being a G-20 member and having a share of 0.5% or more of world trade. The move has cast a shadow on India being able to restore preferential benefits under the Generalised System of Preference (GSP) as part of its trade talks with the US, as only developing countries are eligible for it.

“For purposes of US CVD law, the USTR therefore considers countries with a share of 0.5% or more of world trade to be developed countries,” the USTR said in a federal notice. India’s share in global exports was 1.67% in 2018. In global imports, it was 2.57%.

In July last year, Trump directed his administration to change rules to prevent “self-declared developing countries from availing themselves of flexibilities” in global trade, saying that nearly two-thirds of World Trade Organization members had been able to avail themselves of special treatment and take on weaker commitments by designating themselves as developing countries.

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“Thus, Brazil, India, Indonesia, Malaysia, Thai-land, and Vietnam are ineligible for the 2% de minimis standard, notwithstanding that, based on the most recent World Bank data, each country has a per capita GNI below $12,375,” the USTR said in the notice. Developing countries are permitted up to 2% of export or production subsidies.

The US had in January last year proposed withdrawal of special rights and exemptions for emerging economies such as India and China, which are members of the Organisation for Economic Cooperation and Development (OECD), G20, classified as “high income” by the World Bank or account for more than 0.5% of global merchandise trade.

The move has jeopardised India’s ability to restore GSP benefits under the trade deal that the two countries are negotiating, experts said. “According to this notice, India is no longer a developing country and its hopes of getting GSP may not materialise as it doesn’t qualify to get the benefits,” said a Delhi-based expert on trade issues.

In 2018, India exported goods worth $6.3 billion (as per USTR figures) to the US under the GSP, accounting for around 12.1% of India’s total export to that country.

The average duty concession accruing on account of GSP was almost $240 million in 2018. The two sides are likely to announce a trade deal during Trump’s visit.

As per a White House statement, President Trump would visit India on February 24-25. “The trip will further strengthen the United States-India strategic partnership and highlight the strong and enduring bonds between the American and Indian people,” it said. The Trump administration has yet to announce the dates for the visit of USTR Robert Lighthizer, who was expected to travel to India to finalise the trade deal.

While India wants restoration of benefits under the GSP and more access for its products in the US, Washington has sought doing away with duty on American information and communication technology goods along with market access for its dairy products and duty cuts on Harley-Davidson motorcycles. The US is also keen to sell more almonds to India.
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