USTR takes India off the developing country list

USTR takes India off the developing country list

Why in News?

• The Office of the United States Trade Representative (USTR) has published a notice, amending lists of developing and least-developed countries that are eligible for preferential treatment concerning countervailing duties (CVDs) investigations.
• The new lists consist of 36 developing countries and 44 least developed countries.  

Why this is a cause for concern for 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.
• Countries not given special consideration have lower levels of protection against a CVD investigation. 
• This will now make it easier for it to impose countervailing duties (CVDs) on goods from India.  
• The move has cast a shadow on India being able to restore preferential benefits under the Generalised System of Preference (GSP) as part of its trade talks with the US, as only developing countries are eligible for it.  

What is the basis for classification?

To harmonize 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 de minimis (too small to warrant concern) thresholds and import volume allowance are more relaxed for developing and least-developed countries.
• The de minimis standard is usually a subsidy of 1% or less ad valorem and 2 percent for special cases.
• The 1998 rule is now “obsolete” as per the USTR notice  

What was considered as negligible import volumes?

1. If a country’s goods constitute less than 3% of all imports of that good into the U.S., it meets the ‘negligible import volumes’ standard. For special cases, it is 4%.
2. Imports do not meet the standard, if, individual volumes are less than 3% (special cases: 4%) but the aggregate volume of imports into the U.S. is 7% of all such goods.  

Criteria

• The USTR used the following criteria to determine whether a country was eligible for the 2% de minimis standard: 

1. Per capita Gross National Income or GNI 
2. share of world trade 
3. other factors such as Organisation for Economic Co-operation and Development (OECD) membership or application for membership, EU membership, and Group of Twenty (G20) membership.  

Why India was removed from this 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.