The US has formally listed India as a ‘developed’ nation, as per new rules published by the US Department of State in its Federal Register. The new classification was officially published by the US government on Feb 10, two weeks ahead of President Donald Trump’s maiden trip to the country.
“… Argentina, Brazil, India, Indonesia, and South Africa are ineligible for the 2 per cent de minimis standard, notwithstanding that, based on the most recent World Bank data, each country has a per capita GNI below $12,375,” said the official document.
The notice, issued by the US Trade Representative’s Office, attributes the re-classification of India from formerly a ‘developing’ country to ‘developed’ country on two factors. Firstly, countries having a global trade share of more than 0.5 per cent will no longer be identified as developing countries.
Further, nations having membership of the G-20 bloc, like India does, will no longer be eligible for trade benefits under the Generalised System of Preferences (GSP).
The GSP regime seeks to promote the economic development of developing countries by allowing duty-free access to thousands of products from beneficiary countries.
Under the GSP rules, around 2,000 Indian products, ranging from textile to engineering products, were eligible for reduced tariffs while entering US markets.
The Trump administration had vowed to terminate India’s GSP status in the US in March last year, blaming the decision on India’s reluctance to reciprocate to US’ trade concessions by allowing “equitable” access for US goods entering the Indian market.
“I have determined that India has not assured the US that it will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019,” Trump had declared on Jan 1 this year.
The Feb 10 notice by the US Trade Representative has put a full stop on the matter, from which there is likely no going back.
To give a sense of the impact of not having preferential access to the US market, India was reported to be the largest beneficiary of the GSP regime in 2018, with $6.3 billion worth of Indian imports entering the US duty-free when it was in place.
Further, Indian officials were already believed to be in negotiations with the US government over the restoration of the GSP status before the USTR sealed Trump’s proclamation in official US gazette.
The new classification puts under doubt America’s willingness to re-negotiate on India’s status, despite both the countries being involved in talks to finalise a free trade deal (FTA).
The American President, along with the First Lady Melania Trump, will be in India over Feb 24 and 25. The US President is scheduled to attend engagements in New Delhi and Ahmedabad during the significant state visit.