TWN Info Service on WTO and Trade Issues (Jun18/12)
25 June 2018
Third World Network

US protects home market, wants more access from South for GSP
Published in SUNS #8706 dated  22 June 2018

Geneva, 21 Jun (D. Ravi Kanth) -  As the United States intensifies its trade wars with China and several other countries, with its "America First" and using spurious and fraudulent "national security" grounds to protect domestic industries, the Trump administration is simultaneously demanding enhanced market access from developing countries for granting them benefits of the generalized system of preferences (GSP), trade envoys told SUNS.

On Thursday (21 June), China said cautiously that it will take appropriate measures if the Trump administration presses ahead with another US$200 bill ion in tariffs on Chinese products in response to Beijing's decision to impose retaliatory tariffs on US$50 billion worth of American goods on 15 June.

China imposed retaliatory tariffs on American goods only after the Trump administration slapped the US$50 billion in additional tariffs on Chinese goods over alleged intellectual property theft and forced technology transfer policies that require foreign companies to share their technologies with the local Chines e companies in joint ventures.

President Trump directed his trade representative Ambassador Robert Lighthizer on 15 June to identify US$200 billion worth of Chinese goods for additional tariffs at a rate of 10%.

After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs it has recently announced, Trump said.

"If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200 billion of goods," Trump said, according to an alert issued by Washington Trade Daily of 19 June.

"The trade relationship between the United States and China must remain equitable," Trump said.

China's decision to impose retaliatory tariffs on American goods "clearly indicates its determination to keep the United States at a permanent and unfair disadvantage, which is reflected in our massive $376 billion trade imbalance in goods".

"This is unacceptable. Further action must be taken to encourage China to change its unfair practices, open its market to United States goods, and accept a more balanced trade relationship with the United States," Trump said.

China, which described the US move as "extortionist" on Wednesday, made it clear that it will take appropriate retaliatory measures if the US imposes additional tariffs of 10% on Chinese goods worth US$200 billion.

President Trump's trade advisor Peter Navarro on Tuesday warned that "China does have much more to lose" because of its US$500 billion exports to the U S.

Meanwhile, in a separate development, India notified that its retaliatory tariff against 30 US products worth $240 million will come into effect starting 4 August in response to the US unilateral duties of 25% on steel and 10% on aluminum under the Section 232 security provisions.

"While the retaliatory tariffs could have come into effect immediately, India seems to have given some more time to the US - given the upcoming negotiations for a "trade package" with the US. Assistant US trade representative (USTR) Mark Linscott is likely to visit India in the last week of June to begin the negotiations," according to a news story in Mint on 21 June.

On Wednesday, the European Commission notified that it will start imposing 25% import duty on a range of US products from Friday, in response to US tariffs imposed on EU steel and aluminium earlier this month.

Aside from the trade wars launched by the US against its allies as well as China and other developing countries, the Trump administration is now trying to extract significant reciprocal market access concessions from developing countries such as India, Thailand, Indonesia, and Kazakhstan among others.

India, according to a report in Washington Trade Daily on 20 June, hinted that it might launch a trade dispute at the World Trade Organization if Washington withdraws market access under the Generalized System of Preferences (GSP) scheme.

According to the WTD, an Indian official told the US committee reviewing th e GSP to developing countries on Tuesday (19 June) that "picking out India along with a few GSP benefiting countries for potential withdrawal of tariff preferences on the ground that India does not provide the US "equitable and reasonable access" to its market would be inconsistent with the non-discriminatory and non-reciprocal obligations governing GSP."

The Trump administration, according to WTD, "is reviewing whether India is complying with the eligibility criteria required of GSP beneficiary countries."

The USTR had launched the review on grounds that the GSP beneficiary countries are not providing equitable and reciprocal market access for American products and services.

In response, India maintained that the GSP scheme was conceived and implemented as a non-reciprocal trade preferences program.

India argued that it cannot be expected to provide reciprocal market access in return for the GSP preferences.

Under the GATT and WTO rules, the developed countries had agreed to provide a margin of preference in the tariffs of developing country exports to developed countries as a means to increase developing country competitiveness.

That these GSP preferences are non-reciprocal is further clarified in the Enabling Clause.

The Enabling Clause - which is also referred to as the Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries - was adopted under the Tokyo Round of the GATT in 1979.

It says "preferential tariff treatment accorded by developed contracting parties to products originating in developing countries in accordance with the Generalized System of Preferences" would imply as per the Decision of the Contracting Parties of 25 June 1971 "generalized, non-reciprocal and non-discriminatory preferences beneficial to the developing countries."

Despite these legal provisions, the Trump administration is ready to cock a snook at all international trade rules in trying to extract reciprocal market access in all areas.

For example, the US is now demanding from India substantial market access for the heavily-subsidized US dairy products and medical devices, in return for extending the GSP scheme.

The US is demanding Thailand to provide market access for US pork products following a request from the American Pork Producers Association.

The US is threatening Kazakhstan of withdrawing GSP benefits on account of its poor labour standards.

The US is asking Indonesia to provide market access for American services providers in return for the GSP scheme.

The Trump administration, which operates on the principle of "anything goes " or "nothing is off-limits", is pursuing a twin strategy. While it is willing to torpedo all existing multilateral trade rules and conventions, it is also simultaneously putting the WTO's dispute settlement system to bed, according to trade envoys who asked not to be quoted.