Significance of the “Developed Country” Tag for India

By Xeena Mehta

The officials of the United States Trade Representative (USTR) uphold a list of countries that categorises countries as “developing”, “developed”, and “least-developed”. Countries that are classified as “developing” have permissions to export certain goods to the U.S. without being hit by heavy legal tariffs that are bind to be imposed on goods from “developed” countries. The “developing country” tag was originated by U.S. Trade Act of 1974, to aid poor countries develop faster. World Trade Organization also acceded to grant trade benefits to countries that were classified as poor. If noticed we can see that about two-thirds of countries that are members of the WTO classify themselves as “developing” countries and avail fore deals.

Any such classification of whether a country is “developing” or not is entirely objective. While the economic progress achieved by India and China have achieved over the last few decades is seen as a valid reason to get rid of their special status, but when we point to the various development indicators India and China still fall behind the well-off world. Furthermore, whether such classification is needed is quite divided. India and China were in the eyes of the U.S. administration under President Trump for unjustly depriving trade benefits that are reserved only for the truly developing countries. Therefore, Mr. Trump has sought to reconstruct trade deals with countries like China, India existent to make these deals more equitable to the interests of the U.S. India was constantly been the most benefited under the GSP, with over 2,000 goods been exempted from import tariffs, until the last year administration stripped it of the special benefit India was availing. Now it will be great burden on goods exchanged over international borders as it ended duty-free access for foreign goods into the U.S. This will exert more pressure on the global economy growth, which was already slumping down this year.

If a tariff war is ignited further if countries that are stripped of from their “developing” economy status decide to affront by imposing tariffs back on goods that they import from the U.S. Now even India offered to scale back tariffs on American dairy and other products that are imported into India. This was done after the U.S. grumbled about the restricted access of American companies to developing countries like India. In order to bring down trade barriers on both sides, it is necessary to apply some trade tactics, it can benefit the global economy. To deal with this situation smoothly, countries should take care their consumers which will be most affected by higher tariffs more than guarding and guiding their producers.