Prelims level : Economy Mains level : Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests
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In News:

  • India’s Department of Commerce is looking at the possibility of whittling down tariffs in a couple of contentious sectors the drugs and medical devices and the IT hardware segments in an attempt to temper the unfolding trade tangle with the US.


  • The move to dial down the tension comes a day after the United States announced its intention to “terminate” India’s designation as a beneficiary of its Generalized System of Preferences (GSP) duty concession programme, citing that it had failed to provide assurances that it will give the US “equitable and reasonable” access to its markets in numerous sectors. The issue of import duties on smartphones, printer cartridges and other ICT products has been a sticking point and the US has argued that this goes against its multilateral commitments.
  • The US contention is that India maintains “very high” basic customs duties of up to or higher than 20 per cent, on drug formulations, including life-saving drugs and finished medicines listed on the World Health Organization’s list of essential medicines.
  • Besides, concerns have been flagged by the US following India’s decision to cap prices of cardiac stents in 2017, a move that impacted US stent manufacturers.
  • Both these sectors are being seen as potential low hanging for a possible tempering down of positions.
  • Commerce Ministry indicated that the USTR statement about withdrawal of GSP status was unexpected, given the discussions on some of the stick issues “was ongoing” and that India had backed down on “retaliatory tariffs” on sectors such as steel and aluminum that were to be imposed in November.
  • Officially, in response to the measures announced by the USTR, India has maintained that the withdrawal of benefits, if it were to happen, would have a “minimal” impact and that the government had been engaged in discussions to arrive at a “balance” on the issues raised by the US, including “additional requests” raised by Washington on sectors such as medical devices, dairy products and the IT sector that India has not agreed upon.
  • The INDIAN government had slapped a 10 per cent customs duty on mobile phones and other ICT items such as E-readers for the first time in July 2017 and subsequently hiked it to 15 per cent later that year.
  • Customs duties on mobiles were further increased to 20 per cent in last year’s Budget. Then in October 2018, the basic customs duty on several telecom equipment were increased and duties were slapped on printed circuit boards.
  • The US has stated at the WTO that India’s move to hike tariffs on high-tech information and communication technology products from zero to between 10 and 20 per cent has raised significant concerns for US companies and that most of these items were included in the IT Agreement of the WTO, where tariffs are supposed to zero.
  • The Ministry of Electronics and IT’s position on this issue is that the duty hikes were essential to cushion the domestic electronics sector.
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