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US has removed “Developing” Tag for India

US has removed “Developing” Tag for India

On 10th February 2020, the U.S. removed more than a ten countries, including India, from its list of countries which are classified as “developing” for trade purposes. 

Key Findings:

  • Now these lists of countries will be classified instead as “developed” economies, thus they will not be able to avail trade benefits. 
  • This was done just ahead of U.S. President Donald Trump’s visit to India later this month.
  • The office of the United States Trade Representative maintains a list of countries which it classifies as developing, developed, and least-developed. 
  • Countries which are classified as “developing” are allowed to export few goods to the U.S. without being hit by punitory tariffs that are usually imposed on goods from the “developed” countries. 
  • The “developing country” status owes its origin to the U.S. Trade Act of 1974, which authorized the Generalized System of Preferences to help poor countries develop faster. 
  • These benefits were further extended under the World Trade Organization (WTO) wherein the rich countries agreed to grant trade benefits to countries which had classified themselves as poor. 
  • 2/3rd of countries that are members of the WTO classify themselves as “developing” countries and avail benefits.

Background:

  • The U.S. administration repeatedly had accused that fast-growing countries like India and China of wrongly claiming trade benefits that are reserved only for the genuinely developing countries. 
  • Hence, Mr Trump has sought to renegotiate trade deals with the listed countries.
  • India has been one of the largest beneficiaries under the GSP, where more than 2,000 goods have been exempted from import tariffs until the Trump administration removed it of the exclusive benefit last year.

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