Exports to US at stake

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Bikky Khosla | 16 Jul, 2013
Two of our top ministers -- Anand Sharma and P Chidambaram -- have just returned from their visit to the US, during which they met several US government officials, members of the US Congress and heads of some top American companies, and tried their best to woo US investors. Following this, official releases have been churned out saying that a number of major trade related issues were discussed and a set of "action-oriented recommendations" would soon be worked out. But still nothing is much clear about what we are going to gain or where we will lose out from the recent negotiations.

GSP or Generalised System of Preferences is one such issue -- we are keeping our fingers crossed and hope that the US will continue this facility for Indian exporters. This programme, under which preferential duty-free treatment is provided for up to 3,500 products from 127 designated beneficiary countries including India, is due on July 31, and lately there has been a growing concern that the sops might not be extended for India any further. And if this happens, our exporters, particularly the small and medium scale ones, will be hit hard. In 2012, total US imports under GSP amounted to $19.9 billion and India topped the list of beneficiaries with its total exports to the US under the scheme amounting to $4.5 billion. These figures show how much the negative impact could be on our exports.

What is reason behind this clamour and concern about GSP?

In recent months, we have seen a growing US protest against India's "discriminatory" trade policies. The setting up of the 'Alliance for Fair Trade with India' in June by some US companies is a perfect example of this. The trade lobby alleges that Indian policy makers and courts have engaged in a "persistent pattern of discrimination" over the last year hurting interests of the US industry. Similarly, the US legislators seem no less worried. Last month, more than 40 senators signed a letter to the US Secretary of state John Kerry asking him to make it clear to India that the US would consider "all trade tools at its disposal" if India does not end its "protectionism". And earlier, Washington had approached the WTO to challenge the domestic content requirements norms in our national solar program.

Another worry is that it doesn't seem that Indian negotiators are in a strong position at this moment to bargain at the negotiation table. The UPA government is grappling with some major economic challenges -- including high current account deficit, slowing growth, drying up foreign investment, and more recently, a weakening currency -- and this may force them to bow down to some undue US pressure in return of some quick fix solutions in the form of foreign investment, without considering any long-term view. In addition, the General Election is scheduled early next year and this also may make them more compromising on some "less significant" issues like GSP for the sake of some kind of window-dressing of their performance report before the election.

I invite your opinion on this. Don't you think GSP cut for India will further hit our exports to the US, which currently consumes around 11 percent of our total exports?