President Trump has sent a notice to Congress indicating its intent to end India’s inclusion in the GSP, or Generalized System of Preferences. The GSP is a US government program designed to aid nations with developing economies by allowing some of their products to bypass import duties.
Countries listed in the GSP thus have effective immunity from some forms of tariff threat, which is President Trump’s most visible negotiation tactic. By revoking the status, Trump is signalling an intent to shift the administration’s trade focus to India.
His rationale for India’s removal from the program is clearly stated to be Indian market access, with the nebulous and thus effectively meaningless “equitable and reasonable” terms used to describe what American desires might be.
I am taking this step because, after intensive engagement between the United States and the Government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India as set forth in section 502(c)(4) of the Trade Act (19 U.S.C. 2462(c)(4)).
Public Pool
The letter triggers a 60 day countdown before the removal of trade status.
Fortune magazine notes that Trump has indicated a lack of basic knowledge about Indian tariffs.
At the Conservative Political Action Conference on Saturday, Trump said, “India is a very high-tariff nation. They charge us a lot. … When we send a motorcycle to India, it’s a 100% tariff. They charge 100%. When India sends a motorcycle to us, we brilliantly charge them nothing.” Trump has mentioned India’s 100% motorcycle tariff before, but in fact Indian President Narendra Modi lowered tariffs on U.S. motorcycles from 75% to 50% in 2018.
Fortune
His expertise is further disputed by Indian officials, who claim that the US does have fair market access. What they do not dispute, however, is that their economy has grown beyond the need for inclusion in the program.
A spokeswoman for India’s Commerce Ministry, Monideepa M. Mukherjee, was quoted by the AP:
“The GSP benefits will go, the U.S. will not relent on this,” said Mukherjee. “It’s meant for least-developed countries, and India has graduated out of that.”
Simultaneously, the U.S. has signaled an intent to target Turkey on trade, with a similar letter sent to Congress. The rationale is different, however, with the reasoning in line with the original intent behind the program.
I am taking this step because I have determined that Turkey should no longer be designated as a GSP beneficiary developing country based on its level of economic development as set forth in section 502(c)(4) of the Trade Act (19 U.S.C. 2462(c)(2)).
Public Pool
The statement in that letter suggests that the decision may be motivated more by politics than economics. Turkey, while an erstwhile ally, has been working extensively with American enemy Iran and occasional Trump ally Vladimir Putin. They are also strongly antagonistic toward Saudi Arabia, whose leader they embarrassed on the international stage by exposing Saudi’s brutal assassination of a journalist under American protection. Lastly, they have threatened American allies in Syria, where Trump has recently been forced to recant his spurious decision to withdraw all troops.
