Bilateral International Relations Prelims cum Mains

India, U.S. set to mend trade ties

 

The News

  • The ongoing negotiations between India and the U.S. on multiple trade tussles are progressing smoothly and a deal could be announced when an Indian delegation visits America in mid-July.

 

News Summary

Background:

  • Trade tussle:
    • The U.S. had invoked Section 232 (b) of the U.S. Trade Expansion Act of 1962 to impose 25% duties on steel and aluminium from India. India had taken the issue to the World Trade Organisation (WTO).
    • The U.S. is also challenging India at the WTO for its export subsidy programmes.
    • American companies are also protesting data localisation requirements that India has announced.

 

  • GSP status:
    • The USTR has launched a process to terminate the Generalised System Preferences (GSP) status for India, partly in response to complaints from U.S. manufacturers of medical devices.
    • The Generalized System of Preferences (GSP) is a U.S. trade program designed to promote economic growth in the developing world by providing preferential duty-free entry.

 

Package deal:

  • After recent delegation visits led by senior authority of trade and commerce of both countries, a package deal may be announced to ease multiple trade tussles.
  • As part of a package deal, America is likely to maintain the Generalised System Preferences (GSP) for India, which allows many exporters to enjoy lower tariffs on specific exports to the U.S.
  • India is likely to change the price restrictions imposed on medical devices imported from America to trade margin rationalisation, a more acceptable global practice being demanded by American manufactures.
  • The deal is likely to involve bringing down the duty on high-end Harley-Davidson motorcycles to zero, addressing an issue that President Donald Trump continues to raise publicly and privately about trade relations with India.
  • India imports only a few dozen fully assembled motorcycles in the high capacity category that attracts highest duties.
  • Other market access issues are also on the table.

 

Fresh energy

  • Even partial resolution of the pending trade issues could infuse fresh new energy in bilateral ties, which have taken a hit by the abrupt postponement by the U.S., of the 2+2 dialogue between the Defence and Foreign Ministers of both countries that had been scheduled for this week.

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