WTO talks failure: US may punish India

In a move that could hurt Indian exports, the US has ordered a review to determine whether to "limit, suspend or withdraw" preferential trade benefits to India, Brazil and 11 other developing countries under the US's Generalized System of Preferences (GSP).

The exercise is being widely seen as a fallout of the collapse of the recent WTO talks and the criticism it sparked within US Congress on the "unhelpful" stand of countries like India, Brazil and Argentina at the Doha Round negotiations. However, US trade representative Susan Schwab, who announced the review on Monday, made no reference to the WTO stalemate. She instead dwelt on how a few countries were reaping benefits under the GSP.

But the review covers most of the major members of the G20, which has been battling the US over trade concessions. If the US withdraws GSP benefits to countries like India, Brazil and Venezuela for forging an alliance, as part of G20, then their exports will be impacted.

The GSP programme, started in 1974, currently provides duty-free treatment for 3,400 products from 133 nations. According to the US trade data, last year India's exports under GSP stood at $4,179 billion and they covered auto spares, furniture and jewellery.

While Brazil has reacted sharply, dubbing the action a "bad move", New Delhi is yet to take a formal position. However, UNI quoted Commerce Minister Kamal Nath as saying that the review was "a regular exercise" and "not connected with the current impasse at the WTO".

India is also likely to raise the issue at the Joint Trade Forum with the US.

The review assumes significance as the current Congressional authorisation of the GSP expires on December 31. Besides India and Brazil, the nations targeted are Argentina, Croatia, Indonesia, Kazakhstan, Philippines, Romania, Russia, South Africa, Thailand, Turkey and Venezuela.

On Capitol Hill, Senate Finance Committee chairman Charles Grassley has been critical of giving preferential treatment to "countries that don't want to give us (the US) access to their markets in WTO negotiations".

As part of the review, the USTR has sought comments on whether to limit, suspend or withdraw the eligibility of those GSP beneficiaries for which the total value of US imports under the scheme exceeded $100 million in 2005 and which have been designated as upper-middle-income economies. India meets these criteria.

If the US pushes India hard on GSP, it may lead to an early fructification of a Comprehensive Economic Cooperation Agreement with European Union. It could be announced during the PM's visit to Helinski next month. The FTA with Japan may also be hastened.