Context

The United States removed India from its list of developing countries that are exempted from investigations into whether they harm American industry with unfairly subsidised exports.

The United States Trade Representative (USTR) eliminated a host of countries including Brazil, Indonesia, Hong Kong, South Africa and Argentina from getting special preferences under the methodology for countervailing duty (CVD) investigations, stating that the previous guidance that dated back to 1998 “is now obsolete”.

About

About the US’s internal list of developing and least-developed countries:

• The list is brought by the USTR. The countries are divided into categories of Developing, Developed and underdeveloped. The main criteria for the division of the countries include:
  • Share in the world trade
  • The number of exports from the countries
• It is a US-specific list which lists out the countries to get the various trade benefits while carrying out trade with the U.S.A.

 Features of the listing of the countries as developing:

• The countries would be able to exempt from the investigations about the harm to American industry by the bilateral or multilateral trade.
• These investigations are related to the countervailing duty.
• The countries would be getting the trade benefits.
• The countries would be getting the exemptions in the countervailing duties.
• The countries would be given preference in the Generalised System of Preference (GSP).
• The Generalised System of preference will bring about the various duty exemptions to the trade with the USA.
• The countries will be able to enjoy trade with the USA.
• There will be lesser trade barriers by the US government while trading with the developing countries.

Position of India:

• Previously India was in the category of the developing nation. But USTR has removed India from this list.
• Now India will not be able to avail the trade benefits which are given to the developing countries.

 Why the decision was taken by USTR?

The decision has been taken due to a series of decisions taken by the Indian government has led to trade friction between two countries:

• India’s new e-commerce rules — which have impacted American companies like Amazon and Walmart (majority owner of Flipkart).
• Price controls on medical devices (cardiac stents).
• Tariffs on products like smartwatches and high-end mobile phones.
• Lack of greater market access for the U.S. dairy industry.
• The global economic slowdown and the competence of the Indian Industries have affected the decision taken by USTR.

Effect on Indo-US relationship:

• The decision will further affect the United States-India strategic partnership and highlight the strong and enduring bonds between the American and Indian people.
• The impact of the GSP will be much greater: India has been the biggest beneficiary of the GSP regime.
• In 2018, $6.3 billion of Indian merchandise exports to the U.S. were covered by GSP.
• The sectors which could face the impact of the withdrawal of the GSP regime are gem and jewellery, leather and processed foods.
• However, India has said that the impact is “minimal”, given that Indian exporters were only receiving duty-free benefits of $190 million on the country’s overall GSP-related trade of $5.6 billion.
• This could impact India’s competitiveness in items groups such as raw materials in the organic chemicals sector and intermediary goods in the US market, alongside items such as iron or steel, furniture, aluminium and electrical machinery.
• The impact on small industries in the country could be significant. Such industries would lose their market share in the U.S. without financial support to help them maintain their edge.

Way Forward:

As part of bilateral trade discussions between India and US, India had offered a resolution on significant US requests in an effort to find a mutually acceptable way forward but unfortunately that this did not find acceptance by the US. Therefore, like the US and other nations, India shall always uphold its national interest in these matters and should consider significant development imperatives and concerns and its people who also aspire for better standards of living.