Hours after Narendra Modi was sworn in as prime minister for a second time, the Trump administration has said it is not going back on its decision to terminate India’s designation as a beneficiary developing nation under the key GSP trade programme, terming the suspension a “done deal”.

The Generalised System of Preference (GSP) is the largest and oldest US trade preference programme and is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.

On March 4, President Donald Trump announced that the US intended to terminate India’s designation as a beneficiary developing country under the GSP programme. The 60-day notice period ended on May 3. A formal notification is now expected anytime.

Under the GSP programme, nearly 2,000 products including auto components and textile materials can enter the US duty-free if the beneficiary developing countries meet the eligibility criteria established by Congress.

India was the largest beneficiary of the programme in 2017 with $5.7 billion in imports to the US given duty-free status and Turkey the fifth largest with $1.7 billion in covered imports, according to a Congressional Research Service report issued in January.

The Trump administration has prioritised working with India to ensure that US companies have a level playing field, a senior State Department official said on May 30.

“The persistent market access issues, which we were engaged with our Indian counterparts over the last year, led us to announce in March that we would be suspending or withdrawing India’s benefits under the GSP programme,” the official said on condition of anonymity.

“That suspension is a done deal. Now, the task is how do we look ahead. How do we work under the second Modi administration, to identify a path forward?” the official said.

Noting that Trump has already made the announcement regarding his decision to terminate the designation of India as a beneficiary nation under GSP, the official said there was a 60-day notification to Congress. The official said that does not rule out in the future, being able to achieve the reforms and the market access that the US needs under this programme to restore benefits.

“But I think we need to be looking forward at how do we relaunch an ambitious set of discussions between our trade teams in order to address these outstanding irritants,” the official said, asserting that there is every reason to believe that the GSP suspension will move forward.

The official reiterated that India needed to address some of its major concerns in particular those related to market access and data localisation.

“Data localisation is a phenomenon that’s been taking place globally where we have seen increasing digital protectionism. While we recognise that there are legitimate security and privacy and law enforcement issues related to data protection, we are looking at nearly 8 per cent of India’s GDP, about $160 billion is associated with IT firms who depend upon the free flow of data,” the official said.

So, the US does not want to see market access barriers to US firms in India when Indian companies currently enjoy largely unfettered access to the US markets, the official said.

These issues as well as that surrounding e-commerce will certainly be a topic of conversation with the Indians, the official said.

The senior State Department official said there has been significant growth in the bilateral trade relationship as well as a narrowing of the trade deficit. The bilateral trade is now at about $142 billion. US exports last year increased 28 per cent. The trade deficit for goods and services stands at about $24 billion, which is about 11.9 per cent reduction.

“We have also seen strategic Indian investments in aviation, defence, oil and gas. In the last year, India has imported more than $3.3 billion worth of US crude and is contracted to import $2 billion worth of liquefied natural gas annually, which obviously brings tangible benefits to both our economies and our people,” the official said.

At the same time, the official asserted that tension remained between the two countries. “India remains one of the least open major economies in the world. The Trump administration is committed to ensuring free and fair and reciprocal trade. And we have prioritised working with the government of India to ensure that US companies have a level playing field,” the official said.