Two top American Senators have urged the Trump administration to delay its decision to terminate India's designation as a beneficiary developing country under the Generalized System of Preference due to a lack of compliance until the end of the general elections.
The Generalized System of Preference (GSP) is the largest and oldest US trade preference programme and is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries. The US Congress in March last year voted to renew the GSP through 2020.
In a letter to US Trade Representative (USTR) Robert Lighthizer, Senators John Cornyn from the Republican party and Mark Warner from the Democratic party argued that India-US relationship was too important to rush such an important decision in the middle of an election cycle.
"As you know, India's elections will conclude on May 23, 2019. We believe that the election season may serve as a hindrance for our Indian counterparts in negotiating and concluding a deal on difficult political issues," the two Senators wrote in the letter to Lighthizer on Friday.
It was in April last year that the USTR announced that it planned to review the GSP eligibility of a number of countries, including India.
The USTR's announcement specifically cited "concerns related to its compliance with GSP market access criterion," based on petitions filed from the US medical device and dairy industries.
"If another round of negotiations during the election season does not resolve the outstanding issues, we would ask you to consider delaying the issuance of a Presidential proclamation to withdraw India's GSP benefits by at least 30 days, beyond the 60-day calendar, in order to move the negotiations beyond India's elections," the Senators said.
Allowing for continued negotiations beyond the elections would underscore the importance of this bilateral relationship and provide a real opportunity to resolve these market access issues, potentially improving the overall US-India relationship for years to come, said Cornyn and Warner, who are co-chairs of the powerful Senate India Caucus.
"We understand that the Trump administration may issue a proclamation withdrawing India's GSP benefits 60 days or later from the congressional notification date," the two Senators wrote.
The letter comes in the middle of an intense Indian election cycle, during which the ruling government cannot take a major policy decision, which holds officials from making substantial progress on the crucial negotiations between India and the United States.
"As Co-Chairs of the United States Senate's India Caucus, we fully appreciate and support your efforts to address a host of market access issues facing American businesses in India.
"Congressional support for the GSP programme was made clear last year when the US Senate and US House of Representatives reauthorised the programme, in nearly unanimous fashion, for three years," they said.
On March 4, 2019, Congress was notified of USTR's intention to terminate India's designation as a beneficiary developing country under GSP due to a lack of compliance.
"While we agree that there are a number of market access issues that can and should be addressed, we do remain concerned that the withdrawal of duty concessions will make Indian exports of eligible products to the United States costlier, as the importer of those products will have to pay a 'Most Favoured Nation' (MFN) duty which is higher than the rate under GSP," the Senators said.
Some of these costs will likely be passed on to American consumers, they told Lighthizer.