After the Trump Administration officially revoked India’s participation in the Generalized System of Preference (GSP) on June 5, 2019, India announced that it intends to implement tariffs on roughly 30 HTS-listed items. The items-which include many agricultural goods, such as almonds and apples- would be subjected to 70% duties upon entry.
Established by the 1974 Trade Act, the GSP is the largest and longest-running preference program. It is designed to facilitate free trade amongst allies and interests of the United States, specifically focusing on economic development in “designated beneficiary” countries.
According to the Office of the United States Trade Representative (USTR), in order to earn the classification of “designated beneficiary”, a nation must meet the following criterion: affording workers’ rights to their people, enforcing intellectual property rights, and supporting the rule of law, as well as providing the US with reasonably fair market access.
The Trump Administration cited India’s failure to “provide equitable and reasonable access to its markets” as reasons for its removal from the program. Until its removal, India received more in US goods than any other nation. In fact, in 2017, India acquired $5.7 Billion from Duty-Free items exported to the US. However, similar to trade disputes with other nations, the Trump Administration seeks to better balance the playing field for American companies overseas.
Similar to tactics of other nations entrenched in trade disputes with the US, India appears to be targeting primarily agricultural goods, in an effort to affect Trump voters and their opinions of the president.
While the level of the proposed duties appear extreme, geopolitical norms suggests that India announced these tariffs for two reasons: (1) A form of retaliation for their removal from GSP, (2) as a means of getting the administration’s attention in order to renegotiate any sort of trade agreement in the near future.
Additionally, both the removal of India from GSP and the imposition of the proposed tariffs bode beneficial for no one. Not only do hundreds of US businesses, which account for billions of dollars in profit, oppose the decision, but also the US Congress and the Indian Government.
Due to the mutual disservice, the Trump Administration presumably initiated the process in order to provide the US with additional leverage going into trade negotiations. Negotiators last met in New Delhi on Friday, July 12, to no avail. Although there is no indication of exacerbation, and negotiators are set to meet in Washington in August, it appears that the two nations may be on the precipice of a growing trade conflict.
If these tariffs do go into effect, industries in both nations will suffer. Obviously, we hope this is not the case, but, if it is, don’t fret. Many involved parties are unaware of the various options available to mitigate import duties.
If you import or export items to or from India, contact Diaz Trade Law for assistance with any and all inquiries. Call us at 305-456-3830 or email us at info@diaztradelaw.com
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