[Answered]Critically examine the impact of tagging of India as a developed nation by United States Trade Representative (USTR).

Recently, the U.S. removed more than a dozen countries, including India, from its list of countries that are classified as developing and tagged them as developed economies, thus stripping them of various trade benefits. The move would have a significant impact on India.

Impact of tagging of India as a developed nation by United States:

1. Impact on subsidy: A developing nation tag means a country will get a certain advantage in terms of subsidies and tariff than a developed nation. India will be removed from such advantages, which would impact its subsidy efforts.
2. Implementation of trade initiatives: The developing countries get a longer time to implement global initiatives and more flexibility in adopting measures to boost international trade. For example, a developing nation like India can provide larger input subsidies and MSP as compared to developed nations. India might have to implement these measures earlier.
3. Countervailing duties: The preferential treatment with respect to Countervailing Duties (CVD) investigations falls under the US’ Generalized System of Preferences (GSP) scheme. India is the largest beneficiary nation under the GSP. India no longer in the list of developing countries allows the USA to hold a CVD investigation.
4. Tariff war: The growth effects of a tariff war could rise further if countries that are stripped of their developing economy status decide to retaliate by imposing tariffs on goods that they import from the U.S.
5. Cost of goods: It will increase the overall tax burden on Indian goods entering the USA, thus making it costlier than before.
6. Overall trade: With an impact 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.

Recently, India offered to scale back tariffs on American dairy and other products that are imported into India. Rather than tagging India as a developed nation, efforts must be made to enhance bilateral relations. Protectionism would not benefit any country.