Ending India’s preferential trade treatment won’t hurt economically—but it is politically dangerous.
Just as tensions with China have started to ease, U.S. President Donald Trump has opened a new front in his trade war: India. On March 4, 2019, he fired the first shot by notifying Congress of his intention to end the favorable treatment India has enjoyed under the Generalized System of Preferences (GSP). Negotiated during the 1970s under the auspices of the General Agreement on Tariffs and Trade, and later subsumed into the World Trade Organization, GSP allows many products from India and other developing countries to enter the United States duty-free.
Trump’s decision to end GSP did not come as a surprise. Despite close cooperation between the world’s two largest democracies in defense and other areas, trade relations between them have been prickly for some time. They acquired an extra edge under Trump, who has sarcastically described India as “the tariff king.”
Trump’s favorite complaint is India’s high tariff on Harley Davidson. But that isn’t the only one. He’s also irked that the United States runs a substantial trade deficit—to the tune of $27.3 billion in 2017—with India. Another problem is India’s protectionist impulses, especially in agriculture. And during the last two years, the country also raised tariffs on several manufactured products, such as mobile phones and auto parts.
Further, India’s intellectual-property rights regime has been a source of concern for the United States for a long time. Because of its restrictive patent law, the United States has placed India on the “Priority Watch List” of its Special 301 Report, which identifies countries that don’t adequately protect intellectual property, multiple times—including in 2017.