Will India lose US trade perks over policy disputes?

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India Faces Potential Loss of US Trade Perks Amid Policy Disputes

India is at risk of losing preferential tariff access to the United States, impacting approximately US$5.6 billion in exports. This potential withdrawal of the Generalized System of Preferences (GSP) stems from ongoing disagreements over India's trade and investment policies, marking a significant punitive measure under the Trump administration. The GSP scheme, which has historically benefited India as its largest beneficiary, provides duty-free entry for thousands of Indian products into the US market.
Widening Trade and Investment Policy Disagreements

The dispute has escalated due to a series of policy changes implemented by India. A primary trigger was the introduction of new e-commerce regulations that impose restrictions on foreign companies such as Amazon.com Inc and Walmart-backed Flipkart. These rules limit exclusive partnerships, curb discounting practices, and prohibit sales through vendors in which the e-commerce entities hold an equity interest. This move has been interpreted as an effort to support India's domestic small traders, a significant voter base, ahead of upcoming general elections.
Data Localisation and Tariffs Add to Trade Tensions

Further complicating trade relations are India's directives requiring global payment companies, including Mastercard and Visa, to store their transaction data locally. Additionally, India has increased tariffs on various electronic products and smartphones. These measures, combined with the e-commerce policy shifts, have significantly disrupted broader trade negotiations between the two nations, which were intended to facilitate greater market access for agricultural and dairy products.
Impact on Indian Businesses and Future Trade Prospects

The potential elimination of duty-free access under the GSP scheme would disproportionately affect small Indian businesses, particularly those in the jewelry sector. While the United States Trade Representative (USTR) is reportedly concluding a review of India's GSP status, an announcement is anticipated soon. The ongoing policy differences have stalled progress on a comprehensive trade package, with Indian officials indicating that a resolution is unlikely until after the country's general elections. This impasse raises concerns that the US might eventually demand a full free trade agreement, which could further challenge local Indian industries.

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Will India lose US trade perks over policy disputes?

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