Miffed with Narendra Modi govt’s actions against US firms, Donald Trump threatens retaliation by ending GSP

  • Narendra Modi government has not hesitated to initiate bold actions on the commercial front with the US

  • It is an open secret that the US government acts for and at the behest of its trade lobbies

  • India is the world’s largest beneficiary of the GSP program, which dates from the 1970s

Narendra Modi government has not only refused to pussyfoot on Pakistan but also not hesitated to initiate bold actions on the commercial front to the world’s largest economy and economic power house, the USA.

First, it was capping prices on life-saving drugs that affected MNC drug companies in general. But capping prices of prostheses particularly hit the US health major Johnson and Johnson which in addition had the gall to palm off inferior grade transplants to India and care two hoots about decent compensation to the victims.

Second, some six months ago, the order to house all financial data relating to Indians in India which affected VISA and MasterCard more than anyone else. That was a brilliant move by this government to not only secure financial data of Indian residents but also to make VISA and MasterCard cough up income tax. All along they were refusing to do so on the facile ground that the servers were located abroad though the information related to Indians.

The final nail in the coffin was the December 2018 order of DIPP that fluttered the dovecots of Walmart and Amazon, the e-commerce giants with deep pockets who made a mockery of the marketplace model by selling their own group companies’ wares to the detriment of brick and mortar stores, mainly the mom and pop stores as well as the less well-endowed competitors on the online firmament. The Indian government forbade such incestuous sales from 1 February 2019.

 Miffed with Narendra Modi govt’s actions against US firms, Donald Trump threatens retaliation by ending GSP

File image of Narendra Modi and Donald Trump. PTI

It is an open secret that the US government acts for and at the behest of its trade lobbies. F-16, the precision fighter aircraft, was sold to Pakistan despite knowing it was a rogue state that has a deep animosity with India. But national interest comes first for any country. US is no exception to this rule.

US' armament industry, including fighter aircraft manufacturers, badly need business. It is for the same reason that the US President Donald Trump is threatening to withdraw the GSP regime for India. That is an unstated threat to India to go slow against US business houses like Visa-MasterCard, Amazon-Walmart and J&J or face the music.

But the music is not all that unpleasant. The withdrawal of GSP that entails nil tariff to Indian exporters of some 3,500 items means duties of $190 million. That is hardly anything and can be taken in our stride, said Commerce Secretary Anup Wadhawan. In 2017, exports worth $5.6 billion from India entered the US sans import duty.

India is the world’s largest beneficiary of the GSP program, which dates from the 1970s, and ending its participation would be the strongest punitive action for the South Asian nation since Trump took office in 2017. Farm, marine and handicraft products were among India’s exports most likely to be hit by the move, Ajay Sahai, the director general of the Federation of Indian Export Organizations, told Reuters.

Of the 3,700 products it covers, India made use of the concession for just 1,784, Wadhawan told reporters in the Indian capital. Countries not covered by the GSP face US tariffs of 2 percent and upwards. That indeed puts things in perspective—the threat is not serious both in its intent and implications. The Implications we have analysed. The intent may also not be serious because it is a 60-day notice given to both India and the US Congress.

The point is, benefit to Indian exports is very low given the already low US customs duties. The GSP is more symbolic than valuable. India is not done yet. It has held back retaliation against hike in US duties on Indian aluminum and steel till April 2019. US had a trade deficit of $27.3 billion in 2017 against India but this will get negated with India buying more and more aircraft from the US companies among others.

(The author is a senior columnist and tweets @smurlidharan)

Updated Date: Mar 05, 2019 15:42:55 IST