India seeks tariff waiver on garments made with U.S. cotton

India may pursue U.S. tariff waiver for garments using American cotton.

Photo by Annie Spratt

India is considering seeking a waiver of the 18% reciprocal tariff on garments made with U.S. cotton and exported to the United States, similar to the concession offered to Bangladesh. Representatives from textile export promotion councils indicated that India will pursue this proposal with the U.S.

The U.S.-Bangladesh Agreement on Reciprocal Trade allows certain textile and apparel goods from Bangladesh to receive a zero reciprocal tariff rate for specified export volumes produced with cotton and MMF textile inputs from the U.S. India imports five lakh bales of American cotton annually.

Key Facts

India is considering seeking a U.S. tariff waiver for garments made with American cotton.

The proposed waiver would be on the 18% reciprocal tariff.

The waiver is similar to a concession offered to Bangladesh.

Representatives from textile export promotion councils indicated India will pursue this proposal with the U.S.

India imports five lakh bales of American cotton annually.

UPSC Exam Angles

GS Paper 3 (Economy): Trade policies, tariffs, international agreements

Connects to syllabus topics on international trade, economic development, government policies

Potential question types: Statement-based, analytical, current affairs focused

Visual Insights

India-U.S. Cotton Trade

Map showing the trade relationship between India and the U.S. regarding cotton, highlighting the potential tariff waiver.

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📍India📍United States📍Bangladesh

More Information

Background

The concept of tariffs has a long history, dating back to ancient times when rulers imposed taxes on goods crossing their territories. These tariffs served primarily as a source of revenue for the government. Over time, tariffs evolved into tools for protecting domestic industries from foreign competition. The General Agreement on Tariffs and Trade (GATT), established in 1948, aimed to reduce tariffs and promote international trade. However, countries continue to use tariffs strategically to achieve various economic and political objectives. The evolution of trade agreements has significantly impacted tariff policies. The establishment of the World Trade Organization (WTO) in 1995 further formalized the rules of international trade, including tariff negotiations and dispute resolution. Regional trade agreements, such as the North American Free Trade Agreement (NAFTA) and the European Union (EU), have also played a crucial role in shaping tariff landscapes. These agreements often involve the elimination or reduction of tariffs among member countries, while maintaining tariffs on goods from non-member countries. In India, tariff policies are governed by the Customs Act, 1962 and related regulations. The Ministry of Finance is responsible for formulating and implementing tariff policies. India's tariff structure has undergone significant changes since the economic reforms of the 1990s, with a gradual reduction in tariff rates to promote trade liberalization. However, tariffs remain an important tool for protecting domestic industries and generating revenue. The Constitution of India empowers the Union Government to levy customs duties on goods imported into or exported from India.

Latest Developments

Recently, there has been a growing emphasis on free trade agreements (FTAs) and preferential trade arrangements to boost trade and investment. India has been actively negotiating FTAs with various countries and regions, including the European Union, the United Kingdom, and Australia. These agreements typically involve the reduction or elimination of tariffs on a wide range of goods and services. The ongoing trade tensions between the United States and China have also had a significant impact on global trade flows and tariff policies. Both countries have imposed tariffs on each other's goods, leading to retaliatory measures and disruptions in supply chains. This has prompted other countries to reassess their trade strategies and explore alternative markets. The role of institutions like NITI Aayog is crucial in formulating strategies to navigate these global trade dynamics. Looking ahead, the future of tariff policies will likely be shaped by factors such as technological advancements, geopolitical developments, and the evolving global economic landscape. There is a growing recognition of the need for a more balanced and inclusive approach to trade, taking into account the interests of developing countries and promoting sustainable development. The government's focus on initiatives like Make in India also influences tariff decisions to protect domestic manufacturing.

Practice Questions (MCQs)

1. Which of the following statements is/are correct regarding India's trade relations with the United States? 1. India is seeking a tariff waiver on garments made with U.S. cotton. 2. India imports approximately five lakh bales of American cotton annually. 3. The U.S.-Bangladesh Agreement on Reciprocal Trade allows zero reciprocal tariff on certain textiles from Bangladesh produced with U.S. cotton. Select the correct answer using the code given below:

A.1 and 2 only
B.2 and 3 only
C.1 and 3 only
D.1, 2 and 3

Show Answer

Answer: D

All three statements are correct. Statement 1: India is indeed seeking a tariff waiver on garments made with U.S. cotton. Statement 2: India imports approximately five lakh bales of American cotton annually, as mentioned in the news. Statement 3: The U.S.-Bangladesh Agreement on Reciprocal Trade allows certain textile and apparel goods from Bangladesh to receive a zero reciprocal tariff rate for specified export volumes produced with cotton and MMF textile inputs from the U.S.

2. The General Agreement on Tariffs and Trade (GATT) was established in which year?

A.1945
B.1947
C.1948
D.1950

Show Answer

Answer: C

The General Agreement on Tariffs and Trade (GATT) was established in 1948. It was a multilateral agreement regulating international trade. Its purpose was to substantially reduce tariffs and other trade barriers and eliminate preferences, on a reciprocal and mutually advantageous basis.

3. Consider the following statements regarding the Customs Act, 1962: 1. It provides the legal framework for the levy and collection of customs duties in India. 2. The Central Board of Indirect Taxes and Customs (CBIC) is responsible for the administration of this Act. 3. The Act empowers the State Governments to impose customs duties on goods imported into India. Which of the statements given above is/are correct?

A.1 and 2 only
B.2 and 3 only
C.1 and 3 only
D.1, 2 and 3

Show Answer

Answer: A

Statements 1 and 2 are correct. The Customs Act, 1962, provides the legal framework for the levy and collection of customs duties in India, and the Central Board of Indirect Taxes and Customs (CBIC) is responsible for its administration. Statement 3 is incorrect because the Act empowers the Union Government, not State Governments, to impose customs duties on goods imported into India, as per the Constitution of India.