New Delhi (Sputnik): The Indian Commerce Ministry last week accepted the US withdrawal of duty-free benefits to Indian exporters, saying it will now look to make Indian exports more competitive in the international market. However, India should never allow the US to let the GSP become a bargaining element for their unfair demands, says former World Trade Organization (WTO) member and Director of the Indian Institute of Foreign Trade Manoj Pant.
Though officials in New Delhi have been mulling retaliatory tariffs on US exports to India for quite some time now, the move has been postponed time and time again. India, however, should not respond aggressively as the GSP was a discretionary set of preferences granted by the US, he said.
By removing India from the Generalised System of Preferences (GSP) in May, the US effectively hit Indian exports worth $5.6 billion with tariffs.
In an interview, the former WTO member spoke of different aspects related to US-India relations in the backdrop of recent developments between the two trade partners.
Sputnik: With the Indian Commerce Ministry recently accepting the US' decision over the GSP withdrawal, there is a growing demand for India to impose retaliatory tariffs. How do you view such a scenario?
Pant: GSP is discretion of the US where benefits are given to certain developing countries by them. They do not consider India as a developing country anymore…Indian exporters would now have to make peace with the decision and look towards how to raise the bar in their exports to the US.
Sputnik: Wasn't withdrawing concessions a bit unfair from the US towards India?
Pant: GSP being withdrawn should not be used as a bargaining element by the US against India. We should not have a situation where India is succumbing to unfair demands just to not lose out on the GSP. Now on, India should look to be more competitive in the international market. I feel that would be completely legit for India's growth.
In 1988, the US withdrew the GSP from Hong Kong and Singapore as it felt these economies do not require the benefits anymore. Now, they feel the same about India. It can be withdrawn by the US and their discretion cannot be demanded. Today, India gives many concessions to Nepal but no one can ever say that India is obliged to do so.
Sputnik: Do you think India should raise this matter at the WTO? As a trade expert, what would you suggest to the Indian exporters in the matter?
Pant: GSP is not India's in the form a right. The US is not violating the WTO norms in any way. One needs to understand that some of the Indian exporters to the US were indeed becoming too causal. Why do the Indian exporters only seek to compete with smaller economies like Bangladesh and Pakistan? The Indian exporters should cut the logistics costs and look to compete with the major economies. Improving India's competiveness in the international market is the only positive way forward. India should not look for favours from countries that would later use it as a tool for political manipulation.
Sputnik: India's opposition Congress Party dubbed the GSP withdrawal as "double whammy" for India, saying the government succumbed to US pressure on Iranian crude and also lost the special trade status. Did it actually show India's weaker side in dealing with the US?
Pant: The Iran oil issue is an unconnected matter with the GSP. The US today happens to be one of India's largest trade partners. The whole Iran issue has been turned into a hyperbole. India is importing a very small portion of its oil needs from Iran. They should not make it into a major political issue. The EU had also withdrawn the GSP in the past. But that was never made into a political issue.
If the H1B visa for Indians was stopped completely by the US or the Indian software exports to the US is completely stopped, that would be worth making a political issue. In any case, we have a lot of Indian rupee trade going on with Iran and that can always continue as we are not using US foreign exchange in the process.
The views and opinions expressed in the article are those of the speaker and do not necessarily reflect Sputnik's position