United States President Donald Trump’s decision to terminate India’s designation as a beneficiary developing country under the generalised system of preferences (GSP) programme will push the bilateral trade relations on a bumpy road. The move, which lacks any rationale, would affect about $5 billion worth exports, accounting for 10% of India’s total exports to the US. It appears that the recent restrictions imposed by India on operations of global e-commerce giants and the data localisation policy could have provoked such a move by Washington. However, it must be pointed out that under the rules of the World Trade Organization, the tariff preference schemes like the GSP are non-reciprocal. Hence, the US cannot demand reciprocal market access for its exports to India in return for granting benefits under the scheme. Moreover, the reason stated by the US for terminating these benefits — India’s supposed failure to provide equitable and reasonable market access to American goods — goes contrary to the WTO rules. While challenging America’s move under the WTO’s dispute settlement mechanism, India must send a strong signal that it wants all the countries to play by multilateral, not unilateral, trade rules. The US wants India to lower tariffs in several sectors, including dairy products and wheat. Since cheap and highly subsidised imports from the US in these sectors would result in severe loss of livelihood here, India did well to stand firm on the issue and refused to yield the ground.
The Trump administration has so far taken a strong anti-globalisation stand and displayed a particular penchant for protectionist trade policies, reducing everything to a transactional deal. It was evident in the tariff war with China and the disproportionate focus on import duty on Harley-Davidson and other issues. While conforming to the norms of multilateralism, Indian industries, on their part, must strive to become competitive in the global market instead of seeking crutches like the GSP programme to gain trade access. And, the US needs to be a partner in facilitating India’s economic rise and consolidation, and not constrain it. In a globalised world, no country has the right to arm-twist another sovereign country to get a policy orientation of its choice. If the intention behind the US’ move is to make India succumb to a certain kind of policy, then it is simply unacceptable. Though India has a nearly $30-billion trade surplus with the US, it is nowhere close to the $300 billion trade surplus that China has with America. The sectors that benefitted from preferential access may face the brunt, raising the price of exports in these categories. It is essential that the situation does not spiral out of control. The two countries must explore ways of resolving the knotty trade issues.