The threat of withdrawal of Generalized System of Preferences (GSP) concessions by the US to India may have limited trade impact on the steel sector, several sources told S&P Global Platts.
On March 4, US President Donald Trump wrote a letter to Congress to provide notice of his intention to terminate the designation of India as a beneficiary country under the GSP, a program designed to “promote economic growth and development in the developing world,” due to a lack of reciprocal market access.
“With the US-China trade war on a temporary truce, Trump is starting to go after his next target,” Charu Chanana Kapoor, deputy head of Asia Research at Singapore-based Continuum economics said. “We believe it opens the door for US-India trade negotiations and a trade deal may be on the table.”
Sources at major Indian mills including SAIL, JSW and Tata Steel confirmed that on account of meager exposure of steel exports to US, the impact may be negligible. The US accounted for 4% of exports from India during January to June 2018, according to the US Global Steel Trade monitor.
According to sources, the GSP provides a benefit only if an item generally carries an import duty but is allowed to be imported duty free from a GSP beneficiary country.
On examination of the US Harmonized Trade Schedule, the import tariff under HS codes 7206-7306, which are items considered as steel products, is in any case zero.
This further implies that steel per se is not really affected by GSP or its withdrawal, since the rate of import duty would in both cases remain zero.
Nonetheless, antidumping or countervailing duties wherever applicable and Section 232 tariffs would be chargeable on exports from India.
The Indian government has officially stated that the overall trade impact for all the basket of products also may not be much, given that India exports goods worth $5.6 billion under the GSP, and the duty benefit under GSP is only $190 million annually.
Legal experts, however, pointed out that the enabling clause under the World Trade Organisation is the legal basis for GSP that is offered by developed countries to imports from developing countries and LDCs.
“While the US has unilateral rights to determine which countries and which products are included in their GSP scheme, they simply cannot use this as a tool for demanding market access, or make grant of GSP conditional on their list of demands,” Anuradha RV, partner at Delhi-based Clarus Law said. “Irrespective of trade impact, therefore, such conduct can be challenged at the WTO.”
Yaang Pipe Industry Co., Limited (www.yaang.com)