Why there's little logic behind US decision to withdraw import duty benefits

The declining trade deficit figures clearly reflect that the US exports to India are increasing.

Illustration: Uttam Ghosh/Rediff.com

India is providing greater market access to American goods which is reflected in the declining trade deficit between the two nations, official sources said.

The US trade deficit with India has dipped to $21.3 billion 2018 from $22.9 billion in 2017 and $24.4 billion in 2016.

The commerce and industry ministry is also conducting an internal assessment to explore options to deal with the situation arising from the US decision to withdraw import duty benefits to about 2,000 Indian goods under its Generalized System of Preferences (GSP) programme.

The declining trade deficit figures clearly reflect that the US exports to India are increasing. It increased to $33.12 billion in 2018 from $25.7 billion in 2017.

"With this kind of rise in exports, the US claim that India is not giving reasonable market access is not correct," the sources said adding the US companies in all the sectors including goods and services are market leaders in India.

The US has claimed that India's import duties are high and American companies from sectors like medical devices are not getting adequate market access.

The market share of US firms in coronary stents and knee implants in India too is over 80 per cent.

The sources added that India would not take any knee jerk reaction and would decide on its next course of action only after concluding internal assessment.

The GSP duty benefits which US provides to developing countries including India are non-reciprocal.

Currently, about 121 developing countries including India, Brazil, Afghanistan and Botswana are availing these benefits.

The US decision could impact India's exports worth $5.6 billion under this scheme. Removal of the benefits would result in imposition of duties by the US on these 2,000 products, making them uncompetitive in the American market in terms of pricing.

The US is one of the top trading partners of India.

The bilateral trade between the countries has increased to $74.5 billion in 2017-18 from $64.5 billion in 2016-17.

The US is one of the few countries with which India has a trade surplus, which stood $21 billion in 2017-18.