In a major setback on India-US bilateral ties, Donald Trump plans to end India's preferential trade treatment

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, Reuters said.

In a letter to the Speaker of the US House of Representatives, Nancy Pelosi, Trump said he was determined that New Delhi had 'not assured; the United States that it would 'provide equitable and reasonable access' to the markets of India.

"I will continue to assess whether the Government of India is providing equitable and reasonable access to its markets, in accordance with the Generalised System of Preferences (GSP) eligibility criteria," Trump said in his letter, a copy of which was released to the press, PTI said.

AFP: US says it will end preferential trade status for India and Turkey

— ANI (@ANI) March 5, 2019

Trump, who has vowed to reduce US trade deficits, has repeatedly called out India for its high tariffs, Reuters said.

“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.

The US Trade Representative’s Office said removing India from the 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.

File photo of US president Donald Trump and Prime Minister Narendra Modi. Reuters

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, PTI said.

Commerce Secretary Anup Dhawan tweeted about the development:

Commerce Secretary Anup Wadhawan on US decision to withdraw India’s name from GSP programme list: GoI has to be conscious of our developmental and public welfare interests. Our effort was to balance the affordable prices of the medical devices without compromising on public welfare — ANI (@ANI) March 5, 2019

E-commerce rules tightened

US-India trade ties were hurt after the government 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 the government 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 Pelosi could be seen as a major setback in India-US bilateral relationship, in particular in the arena of trade and economy

'Turkey's economy has grown'

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.

"Increases in Gross National Income per capita, declining poverty rates and export diversification by trading partner and by sector are all evidence of Turkey's increased level of economic development. In addition, Turkey has graduated from other developed countries' GSP programmes due to its increase in economic development or through reciprocal arrangements," he argued.

With inputs from agencies