Washington, Mar 5: US President Donald Trump said on Monday he intends to end India's preferential trade treatment under a programme that allows $5.6 billion worth of Indian exports to enter the United States duty free.
Trump, who has vowed to reduce US trade deficits, has repeatedly called out India for its high tariffs.
"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," Trump said in a letter to congressional leaders.
In a separate letter, Trump also informed the Congress of his intent to terminate the GSP beneficiary designation of Turkey. This was primarily because the economy of Turkey had improved a lot in the last four-and-a-half decades, he said.
"In the four-and-a-half decades since Turkey's designation as a GSP beneficiary developing country, Turkey's economy has grown and diversified," he said.
The US Trade Representative's Office said removing India from the Generalized System of Preferences (GSP) programme would not take effect for at least 60 days after notifications to Congress and the Indian government, and it will be enacted by a presidential proclamation.
The US goods and services trade deficit with India was $27.3 billion in 2017, according to the US Trade Representative's Office.
India is the world's largest beneficiary of the GSP programme and ending its participation would be the strongest punitive action against India since Trump took office in 2017.
US-India trade ties were hurt after India unveiled new rules on e-commerce that restrict the way Amazon.com Inc and Walmart Inc-backed Flipkart do business.
The e-commerce rules followed a drive by New Delhi to force global card payments companies such as Mastercard Inc and Visa Inc to move their data to India and the imposition of higher tariffs on electronic products and smartphones.
Trump's letter to congressional leaders could be seen as a major setback in India-US bilateral relationship, in particular in the arena of trade and economy.
Under the United States GSP programmeme, certain products can enter the US duty-free if the beneficiary developing countries meet the eligibility criteria established by Congress.
The GSP criteria include, among others, respecting arbitral awards in favour of US citizens or corporations, combatting child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection and providing the US with equitable and reasonable market access.
Countries can also be graduated from the GSP programmeme, depending on factors related to economic development.
The Trump administration had launched an eligibility review of India's compliance with the GSP market access criterion in April 2018.
"India has implemented a wide array of trade barriers that create serious negative effects on United States commerce. Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion," the the US Trade Representative (USTR) said.
The US had designated Turkey as a GSP beneficiary developing country in 1975. An increase in the Gross National Income (GNI) per capita, declining poverty rates and export diversification by trading partner and by sector were evidence of Turkey's higher level of economic development, the USTR said.
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