The U.S. is removing India from its Generalised System of Preferences (GSP) on June 5. Established by the U.S. Trade Act of 1974, the GSP seeks to promote economic development by eliminating duties on thousands of products when imported from one of 120 designated beneficiary countries and territories. India is said to export about 2,000 products to the U.S. that enjoy zero-rating, worth US$5.6 billion. On May 31, Trump announced that India has not assured the U.S. that “it will provide equitable and reasonable access to its markets”, and therefore “it is appropriate to terminate India’s designation as a beneficiary developing country”.

In March, Anup Wadhawan, India’s Commerce Secretary, said the withdrawal of GSP benefits to India would have “a minimal and moderate impact” and would only amount to US$190 million on India’s US$5.6 billion in exports to the U.S., under the GSP category. Puran Dawar of the Agra Footwear Manufacturers and Exporters Chamber (AFMEC), told local media the decision would certainly impact India’s exports of leather goods to the U.S.. Reportedly, India’s Council for Leather Exports (CLE) set an export target of US$10 billion by 2024-25 from the current US$5.73 billion, but Trump’s decision could hinder this growth, coupled with the fact that hundreds of tanneries in Kanpur, which represents 40% of the country’s leather exports, remain closed since mid-December.

Trump’s decision to revoke trade privileges for India is said to follow complaints from U.S. dairy farmers and medical device manufacturers; certain products exported from the U.S. to India are said to be subject to tariffs that can be as high as 150%. Access to the 1.3 billion Indian population, however, is said to be crucial for U.S. companies such as Amazon, Walmart, Google and Facebook, which have invested billions of dollars in the country in recent years; India has 600 million internet users, more than any country except China.

Sources: Economic Times/CNN