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India’s removal from USTR list GS: 2 "EMPOWER IAS"

In news:

  • The office of the United States Trade Representative (USTR) has taken off India from the list of developing and least-developed countries that are eligible to claim benefits for preferential treatment with respect to Countervailing duties (CVDs) investigations.

 

More from the news:

  • The USTR has also updated its list of countries that are least-developed under the US countervailing duty (CVD) laws.
  •  Countries under this list are eligible for preferential treatment when it comes to CVD investigations.
  • Other countries that were removed from the list include Thailand, Vietnam, Brazil, Indonesia and Malaysia.

 

What is the USTR list of developing and least-developed countries?

  • In the Uruguay Round Agreements Act (URAA), the US Congress had amended the CVD law in order to confirm US obligations under the World Trade Organisation (WTO) Agreement on Subsidies and Countervailing Measures (SCM).
  • Under this SCM agreement, countries that had not yet reached the status of a developed country were entitled to special treatment for purposes of countervailing measures.
  • This meant that imports from the member countries included in the list by USTR were subject to different thresholds for determining if countervailing subsidies are “de minimis” (too trivial or minor to merit consideration) and whether import volumes are negligible.
  • As per the Tariff Act of 1930, Congress delegated the responsibility to designate those WTO members whose imports would be subject to these special thresholds to the USTR.
  • USTR is also required to publish this list of designations and update it if necessary in the Federal Register.
  •  To determine these designations, the USTR relies on data such as World Bank’s data on Gross National Income (GNI) and trade data obtained from the Trade Data Monitor.
  •  This also contains official data from national statistical bureaus, customs authorities, central banks and other such government agencies.

 

New classification by US

  • To harmonise U.S. law with the World Trade Organization’s (WTO) Subsidies and Countervailing Measures (SCM) Agreement, the USTR had, in 1998, come up with lists of countries classified as per their level of development.
  • These lists were used to determine whether they were potentially subject to U.S. countervailing duties. The 1998 rule is now “obsolete” as per the USTR notice.
  • Countries not given special consideration have lower levels of protection against a CVD investigation.
  • A CVD investigation must be terminated if the offending subsidy is de minimis (too small to warrant concern) or if import volumes are negligible.
  • The de minimis thresholds and import volume allowance are more relaxed for developing and least-developed countries.

 

Delisting India

  • India was, until February 10, on the developing country list and therefore eligible for these more relaxed standards. It has now been taken off of that list.
  • India, along with Brazil, Indonesia, Malaysia, Thailand and Vietnam were taken off the list since they each have at least a 0.5% share of the global trade, despite having less than $12, 375 GNI (the World Bank threshold separating high-income countries from others).
  • India was taken off the list also because — like Argentina, Brazil, Indonesia and South Africa — it is part of the G20.
  • Given the global economic significance of the G20, and the collective economic weight of its membership (which accounts for large shares of global economic output and trade), G20 membership indicates that a country is developed a/c to USTR.

 

Why was India removed?

  • According to USTR,India’s share in global trade was 2.1 % for exports and 2.6% for imports in 2017.
  • India was also a G20 member which accounts for large shares of global economic output and trade.
  • Further, being a part of G20 India can be classified as a developed country despite having a per capita GNI below $12,375.

 

What changes for India?

  • In 1998, the USTR published an interim final rule (1998 rule), which designated Subsidy Agreement countries eligible for special de minimis countervailable subsidy and negligible import volume standards under the CVD law
  • . This essentially means the lists USTR had prepared as per the 1998 rule helped it to determine if they were eligible for preferential treatment against CVD investigations or not.
  • Now, the USTR has revised the lists in the 1998 rule and removed the rule itself terming it “obsolete”.
  • Further, for the purposes of the de minimis threshold, there will be no distinction between developing and least-developed countries, since both such countries will be subject to the same threshold.
  • Until February 10, 2020, India was on the USTR’s list of developing countries, making it eligible for preferential treatment against CVD investigations and de minimis thresholds. It will no longer get this benefit.

 

Impact on India

  • India is the largest beneficiary nation under the GSP, with total benefits from tariff exemptions amounting to $260 million in 2018, according to the data from the USTR’s office.
  • In 2018, India exported goods worth $6.3 billion (as per USTR figures) to the US under the GSP, accounting for around 12.1% of India’s total export to that country.
  • India no longer in the list of developing countries allows the USA to hold a CVD investigation.
  • The CVD laws allow the US to hold an investigation into the trade policies of other countries to determine whether they are harming the US trade.
  • If the investigation finds that India’s policies allow exporters to sell their products in the US at a lower rate the US can impose a countervailing duty, to make the Indian goods more expensive in the US markets.
  • Despite having a minimal impact on India's overall outbound trade with the US, specific exports from India in a diverse set of sectors such as jewellery, leather, pharmaceuticals, chemicals and agricultural products may face higher costs and competition.

 

https://www.thehindu.com/business/setaei/article30813123.ece/ALTERNATES/FREE_960/TH14Talking-businessbw

 

What is Countervailing Duty (CVD)?

  • Countervailing duty (CVD) is an additional import duty imposed on imported products (by the importing country) when such products enjoy benefits like export subsidies and tax concessions in the country of their origin (ie., where it is produced and exported).
  • CVD is thus an import tax by the importing country on imported products.
  •  It is an attempt to ensure fair and market oriented pricing of imported products and thereby protecting domestic industries and firms.
  •  The most popular example for CVD is the imposition of additional duty by an importing country when the product has given export subsidy by the exporter/producer country.

 

What is the purpose of Countervailing Duty?

  • The objective of CVD is to nullify or eliminate the price advantage (low price) enjoyed by an imported product when it is given subsidies or exempted from domestic taxes in the country where they are manufactures.
  •  Often countries give subsidies to their exported products so that they can compete in the international market at a reduced price.
  • The CVD as a tax raises the price of the imported products. It brings price of an imported product to its true market price.

 

 

Source)

https://www.thehindu.com/business/ustr-takes-india-off-developing-country-list/article30813126.ece