President Donald Trump in 2019 terminated India’s designation as a beneficiary developing nation under the key GSP trade programme after determining that it has not assured the US that it will provide equitable and reasonable access to its markets.
‘The United States and India are negotiating on a wide range of trade concerns, including greater access to the Indian market for US agricultural products, potentially in exchange for US restoration of India’s eligibility under GSP. The current status of the negotiations has not been disclosed,’ the latest report by independent Congressional Research Service (CRS) said.
Reports of the CRS are not an official report of the US Congress. Its subject matter experts prepare reports on various issues for the American lawmakers to make informed decisions. The comment on India is mentioned in the ‘Major Agricultural Trade Issues in the 117th Congress’ dated January 8.
In September last year, the Indian government enacted three laws intended, in part, to help integrate Indian agriculture into the global market.
Commerce and Industry Minister Piyush Goyal in September said most issues preventing a limited trade deal between India and the United States have been resolved and an agreement could be signed anytime the political situation in the US allows it.
India is seeking exemption from high duties imposed by the US on some steel and aluminium products, resumption of export benefits to certain domestic products under the GSP, and greater market access for its products from sectors such as agriculture, automobile,automobile components and engineering.
On the other hand, the US wants greater market access for its farm and manufacturing products, dairy items and medical devices, apart from cut in import duties on some information and communication technology products.
Noting that the United States and India view one another as important strategic partners to advance common interests regionally and globally, the CRS report said given the rapid growth in population and income among a large segment of the population, demand for higher-value food products such as fruits, nuts, dairy products, and other livestock products is growing among Indian consumers.
While India is among the world’s largest producers and consumers of a range of crop and livestock commodities, United States Department of Agriculture (USDA) projects that India will continue to be an important importer of dairy products, vegetable oils, pulses, tree nuts, and fruit and that it will continue to be a major exporter of rice, cotton, and buffalo meat.
Observing that US-India trade negotiations follow a period of trade tensions, the CRS said in March 2018, the United States levied additional tariffs on steel and aluminum imports from India.
India responded by identifying certain US food products for retaliatory tariffs but did not levy them until June 16, 2019, after the United States terminated preferential treatment for India under the GSP.
India’s retaliatory tariffs range from 10 per cent to 25 per cent on imports of US chickpeas, shelled almonds, walnuts, apples, and lentils. Both countries’ tariffs and India’s GSP status are likely issues in the ongoing negotiations, it said.
Agricultural exports from the US to India have increased since 2015, reaching USD 1.6 billion in 2019. The US in the same year imported agricultural products valued at USD 2.6 billion from India.
The CRS said that India maintains high tariffs on many products— for example, 60 per cent on flowers, 100 per cent on raisins, and 150 per cent on alcoholic beverages. Some Members of Congress have requested that the United States Trade Representative (USTR) seek to reduce the current 36 per cent tariffs faced by US pecans. Since 2017, a system of annual import quotas on pulses has restricted US exports of pulses to India.
Export of wheat and barley to India are currently restricted due to its zero-tolerance standard for certain pests and weeds, and restrictions also exist on imports of livestock genetic material, it said.
In its report, the CSR informed lawmakers that USTR may continue challenging India’s domestic support for agriculture at upcoming WTO Committee on Agriculture (COA) meetings and, if necessary, could pursue these concerns through WTO’s dispute settlement mechanism. India’s domestic support for agriculture could be an issue during US-India trade negotiations or during the discussions related to WTO reform on agriculture.