President Trump has a victory present for newly re-elected Prime Minister Narendra Modi – an economic bombshell.
In his latest act of aggressive protectionism in what has already been an action-packed week, Trump late Friday announced that his administration was terminating India’s designation as a developing nation under a trade program that allowed Indian exporters to ship 2,000 products into the US duty free. The decision to revoke India’s preferential trade status, which mirrors Trump’s decision to revoke Turkey’s status under the program a few weeks back, comes one day after Modi was sworn in for a second term.
Under the decades-old program – known as the Generalized System of Preferences – Indian companies were able to avoid some $5.7 billion in duties back in 2017.
The new standards will take effect June 5.
“I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets,” Trump said in a proclamation on Friday evening. “Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.”
The decision isn’t unexpected: The White House warned back in March that it could end India’s preferential treatment if India didn’t agree to certain reforms, but it decided to hold off so as to not hurt Modi politically during the run up to the election. According to Bloomberg, Trade Representative Robert Lighthizer has become increasingly frustrated with India’s trade barriers and practices. The trade rep has taken issue with the country’s self-designation as a developing nation at the World Trade Organization.
The White House’s Friday proclamation also imposes tariffs on solar cells and washing machines from India and Turkey.
Those tariffs had been imposed by Trump in 2018, but India and Turkey had been exempt because of their status as developing nations under the GSP.
One critic of Trump’s decision warned that ending the designation for India would cost American businesses hundreds of millions of dollars a year.
Dan Anthony, executive director of the Coalition for GSP, a trade group, said that the decision “will cost American businesses over $300 million in additional tariffs every year.”
“There are no winners from today’s decision,” Anthony said in a statement.
“American importers will pay more, while some American exporters will continue to face current market access barriers in India and others, including farmers, are very likely to be subject to new retaliatory tariffs.”
Read the White House order below:
Subject: Proclamation to Modify the List of Beneficiary Developing Countries Under the Trade Act of 1974
BY THE PRESIDENT OF THE UNITED STATES OF AMERICA
1. In Executive Order 11888 of November 24, 1975, the President designated India as a beneficiary developing country for purposes of the Generalized System of Preferences (GSP) (19 U.S.C. 2461 et seq.).
2. Pursuant to section 502(d)(1) of the Trade Act of 1974, as amended (the “1974 Act”) (19 U.S.C. 2462(d)(1)), the President may withdraw, suspend, or limit the application of the duty-free treatment accorded under the GSP with respect to any beneficiary developing country. In taking any action under section 502(d)(1) of the 1974 Act, the President shall consider the factors set forth in sections 501 and 502(c) of the 1974 Act (19 U.S.C. 2461 and 2462(c)).
3. Section 502(c)(4) of the 1974 Act (19 U.S.C. 2462(c)(4)) provides that, in determining whether to designate any country as a beneficiary developing country, the President shall take into account, among other factors, the extent to which such country has assured the United States that it will provide equitable and reasonable access to the markets and basic commodity resources of such country and the extent to which such country has assured the United States that it will refrain from engaging in unreasonable export practices.
4. Consistent with section 502(d)(1) of the 1974 Act, and having considered the factors set forth in sections 501 and 502(c), I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.
5. Section 502(f)(2) of the 1974 Act (19 U.S.C. 2462(f)(2)) requires the President to notify the Congress and the affected beneficiary developing country, at least 60 days before termination, of the President’s intention to terminate the affected country’s designation as a beneficiary developing country, together with the considerations entering into such decision. I notified the Congress and India on March 4, 2019, of my intent to terminate India’s designation, together with the considerations entering into my decision.
6. Pursuant to section 203 of the 1974 Act (19 U.S.C. 2253), and after receiving a report from the International Trade Commission prepared under section 202 of the 1974 Act (19 U.S.C. 2252), the President may implement a measure in the form of a safeguard to address increased imports of articles that are a substantial cause of serious injury to a domestic industry producing like or directly competitive products. When acting pursuant to section 203 of the 1974 Act, the President shall take action that he determines will facilitate efforts of the domestic industry to make a positive adjustment to import competition and provide greater economic and social benefits than costs.
7. In Proclamation 9693 of January 23, 2018, pursuant to section 203 of the 1974 Act, I implemented a safeguard measure on imports of certain crystalline silicon photovoltaic (CSPV) cells, whether or not partially or fully assembled into other products (including, but not limited to, modules, laminates, panels, and building-integrated materials) (“CSPV products”). In Proclamation 9694 of January 23, 2018, pursuant to section 203 of the 1974 Act, I implemented a safeguard measure on imports of large residential washers.
8. The safeguard measures implemented by Proclamations 9693 and 9694 exempt imports of covered products from developing countries that are Members of the World Trade Organization (WTO), including India, if such a country’s individual share of total imports of the product does not exceed 3 percent and if imports of all such countries with less than 3 percent import share do not collectively account for more than 9 percent of total imports of the product.
9. Consistent with my determination that it is appropriate to terminate the designation of India as a beneficiary developing country under the GSP, effective June 5, 2019, I have determined to remove it from the list of developing country WTO Members exempt from application of the safeguard measures on CSPV products and large residential washers. To reflect India’s removal from the list, I have determined that it is appropriate to revise subdivision (b)(2) of U.S. note 17 and subdivision (b) of U.S. note 18 to subchapter III of chapter 99 of the Harmonized Tariff Schedule of the United States (HTS) to delete the references to India.
10. Section 604 of the 1974 Act (19 U.S.C. 2483) authorizes the President to embody in the HTS the substance of the relevant provisions of the 1974 Act, and of other Acts affecting import treatment, and actions there under, including removal, modification, continuance, or imposition of any rate of duty or other import restriction.
11. In Proclamation 9887 of May 16, 2019, I terminated the designation of Turkey as a beneficiary developing country for purposes of the GSP and removed the exemption for Turkey from application of the safeguard measures on CSPV products and large residential washers. To reflect this termination and removal, I made certain modifications to the HTS, effective with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on May 17, 2019.
NOW, THEREFORE, I, DONALD J. TRUMP, President of the United States of America, acting under the authority vested in me by the Constitution and the laws of the United States of America, including title V and sections 203 and 604 of the 1974 Act, do hereby proclaim that:
(1) The designation of India as a beneficiary developing country is terminated, effective June 5, 2019.
(2) To reflect this termination, general notes 4(a) and 4(d) and pertinent subheadings of the HTS are modified as set forth in Annex A to this proclamation.
(3) Any provisions of previous proclamations and Executive Orders that are inconsistent with the actions taken in this proclamation are superseded to the extent of such inconsistency.
(4) The exemption for India from application of the safeguard measures on CSPV products and large residential washers is removed, effective June 5, 2019.
(5) To reflect this revision, subdivision (b)(2) of U.S. note 17 and subdivision (b) of U.S. note 18 to subchapter III of chapter 99 of the HTS are each modified as set forth in Annex B to this proclamation.
(6) Any merchandise from India or Turkey subject to the safeguard measures implemented by Proclamation 9693 and Proclamation 9694 that is admitted into a United States foreign trade zone on or after 12:01 a.m. eastern daylight time on June 5, 2019, must be admitted as “privileged foreign status” as defined in 19 CFR 146.41, and will be subject upon entry for consumption to the safeguard measures implemented by Proclamation 9693 and Proclamation 9694.
IN WITNESS WHEREOF, I have hereunto set my hand this thirty-first day of May, in the year of our Lord two thousand nineteen, and of the Independence of the United States of America the two hundred and forty-third.