India out of US’ developing nations list for trade benefits

The office of the

Question: Consider the following statements:
(1) United States Trade Representative (USTR) has taken off India from the list of developing countries.
(2) According to USTR, new lists consist of 36 developing countries and 44 least developed countries
(a) Only (1)
(b) Only (2)
(c) Both (1) and (2)
(d) None of the above
Answer: (c)
Related facts:

  • The office of the United States Trade Representative (USTR) has removed the name of India from the list of developing and least-developed countries that are eligible to claim benefits for preferential treatment with respect to Countervailing duties (CVDs) investigations.
  • The preferential treatment with respect to CVDs investigations falls under the US’ Generalized System of Preferences (GSP) scheme.
  • Generalized System of Preferences (GSP) is an umbrella that comprises the bulk of preferential schemes granted by industrialized nations to developing countries.
  • Countervailing duty (CVD) is an import tax imposed on certain goods in order to prevent dumping or counter export subsidies.
  • Along with India, USTR has also eliminated other countries including Brazil, Indonesia, Hong Kong, South Africa, Malaysia, Thailand, Vietnam and Argentina from getting preferential treatment.
  • The new lists consist of 36 developing countries and 44 least developed countries.
  • The move comes ahead of US President Donald Trump’s visit to India to talk and potentially sign a trade deal.

India is USTR’s Developed Country

  • According to USTR, India’s share in global trade was 2.1 % for exports and 2.6% for imports in 2017.
  • India along with nations like Argentina, Brazil, Indonesia, and South Africa, is part of the G20 bloc and G20 membership indicates that a country is developed.
  • As the G20 members account for large shares of global economic output and trade.
  • Further, being a part of G20 India can be classified as a developed country despite having a per capita GNI below $12,375.

Indian Context:

  • India is the largest beneficiary nation under the GSP, with total benefits from tariff exemptions amounting to $260 million in 2018, according to the data from the USTR’s office.
  • In 2018, India exported goods worth $6.3 billion (as per USTR figures) to the US under the GSP, accounting for around 12.1% of India’s total export to that country.
  • India no longer in the list of developing countries allows the USA to hold a CVD investigation.
  • The CVD laws allow the US to hold an investigation into the trade policies of other countries to determine whether they are harming the US trade.
  • If the investigation finds that India’s policies allow exporters to sell their products in the US at a lower rate the US can impose a countervailing duty, to make the Indian goods more expensive in the US markets.
  • Despite having a minimal impact on India’s overall outbound trade with the US, specific exports from India in a diverse set of sectors such as jewellery, leather, pharmaceuticals, chemicals and agricultural products may face higher costs and competition.

Links:
https://economictimes.indiatimes.com/news/economy/foreign-trade/india-out-of-us-developing-nations-list-for-trade-benefits/articleshow/74089409.cms
https://www.thehindu.com/business/ustr-takes-india-off-developing-country-list/article30813126.ece
https://www.fibre2fashion.com/news/textile-news/india-no-more-a-developing-nation-for-us-trade-benefits-255141-newsdetails.htm