U.S. President Donald Trump looked set to open a new front in his trade wars on Monday with a plan to end preferential trade treatment for India that allows duty-free entry for upto $5.6 billion worth of its exports to the United States.
"I am taking this step because, after the intensive engagement between the United States and the government of India, I have determined that India has not assured the USA that it will provide equitable and reasonable access to the markets of India", Trump said in a letter to congressional leaders.
GSP criteria include, among others, respecting arbitral awards in favor of United States citizens or corporations, combating child labor, respecting internationally recognized worker rights, providing adequate and effective intellectual property protection, and providing the United States with equitable and reasonable market access, stated the USTR.
With Donald Trump determined to end what he calls "unfair" trade practices by United States allies, the move is set to become the strongest punitive action against India so far.
Washington intends to terminate Turkey's preferential status because it is "sufficiently economically developed" and no longer qualifies, according to the US Trade Representative's office.
Ending India's participation would be Trump's strongest punitive action against New Delhi since he took office in 2017.
Under the GSP programme, "certain products" can enter the USA duty-free if countries meet eligibility criteria including "providing the U.S. with equitable and reasonable market access".
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"The withdrawal of GSP benefits to India will have a minimal and moderate impact", Mr. Wadhawan said at a press conference.
Countries can also be graduated from the GSP program depending on factors related to economic development, it added.
"Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion", it added.
The decision comes as the United States is reported to be making headway in trade negotiations with China aimed mainly at cutting American trade deficits with a deal expected soon.
Last year India retaliated to those tariff hikes by raising import duties on a range of goods.
Removing the country from the GSP program would not take effect for at least 60 days after notifications are issued to Congress and the Indian government.
The two countries have had differences over the restrictions placed on e-commerce by Amazon and on Walmart subsidiary Flipkart and on data housing by Visa and Mastercard.
Commerce Secretary Anup Wadhawan said the withdrawal of the GSP for Indian products would have limited impact. Our effort was to balance the affordable prices of the medical devices without compromising on public welfare.