Indo-US trade talks: Key issues to be discussed

World

12 Jun 2018

Harley Davidson tariffs, GSP to be discussed in Indo-US talks

After a long-drawn tension between the US and India over trade disputes, Commerce Minister Suresh Prabhu and US Trade Representative Robert Lighthizer are set to discuss terms in Washington.

Tariffs on Harley Davidson motorcycles, and India's market access to the US under the generalized system of preferences (GSP) are likely to be the major points of discussion.

Here's more.

What is GSP and why is it important for India

The generalized system of preferences (GSP) programme allows around 3,500 products from India to access US markets at zero or very low tariffs. These products come from myriad industries including chemicals, textiles, engineering, gems, jewellery etc.

Trade disputes

India-US trade disputes had hit a new low in March

While trade has been a thorny issue in India-US ties for a while now, it hit a new low in March when President Trump railed against import tariffs imposed by India, and challenged several Indian export subsidies at the World Trade Organization (WTO).

Subsequently, in April, the Trump administration said it was reviewing India's eligibility for the generalized system of preferences (GSP).

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Despite strong bilateral trade, contentions remain

Last year, bilateral trade between the US and India touched a massive $126bn, with a trade deficit of around $28bn in favor of India. However, US officials aren't pleased with India's average import tariffs of 13.4% versus the US' average import tariffs of 4.5%.

Import tariffs

Trump's major contention was import tariffs on Harley Davidson motorcycles

Trump's major contention was India's 50% import tariff on Harley Davidson motorcycles, as against the US' policy of imposing "zero tax" on the import of Indian motorcycles to the US.

In February, the finance ministry had reduced import duties on foreign-built motorcycles to 50%, from the earlier 60% (engine < 800cc) and 75% (engine > 800cc).

However, that failed to please Trump.

Suresh Prabhu: India will respond to US concerns "appropriately"

"The US is a very important partner for India. Every country has a right to ask for the best deal for itself. If formally asked by the US, we will respond to it as appropriately as possible," Suresh Prabhu had told reporters earlier.

India's contention

Inclusion in the GSP programme is India's biggest concern

Inclusion in the GSP programme is India's biggest concern

Meanwhile, India has also been affected adversely by several measures of the US' trade policy, including the imposition of 25% import tariffs on steel and aluminium imports, restrictions on H-1B visas etc.

However, India's biggest point of contention is possibly the issue of its eligibility under the GSP programme, of which India is the largest beneficiary, exporting goods worth $5.6bn annually.

Govt. official: Will reduce Harley tariffs if included in GSP

"We are open to further import duty cut on high-end bikes like Harley-Davidson. But we need assurance that India's market access to the US under GSP will not be curtailed," said a government official on the condition of anonymity.

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