The United States will restore India’s benefits under the Generalized System of Preferences (“GSP”) as part of the deal. The GSP program eliminates duties on a range of products for certain developing countries designated by the United States. President Trump removed India from the program in June 2019, citing various trade barriers and market access issues faced by U.S. companies in India. India’s benefits under the program are valued at $6.4 billion.

Also as part of the deal, India will (1) remove price controls on medical devices, including heart stents and knee implants, (2) improve market access for agriculture and dairy products, and (3) add intellectual property protections. The agricultural products benefiting from greater market access include almonds, cherries, pork, hay, and dried grains. The benefits accruing to the United States from these commitments will match the $6.4 billion benefit India would gain under the GSP program.

Both sides hope to incorporate tariff reductions, which could include reductions for duties on U.S. information and communication technology goods and Harley-Davidson motorcycles. It is unclear at this point if U.S. duties on Indian steel and aluminum under Section 232 will be affected.

Although this pact is relatively limited in scope, it represents the first step towards a more comprehensive trade agreement between the two nations.

Ambassador Lighthizer answered questions on a number of topics relating to the WTO and, more generally, current U.S. trade policies:

WTO Reform Is the WTO still relevant? In short, yes. Lighthizer explained that much work is done at the WTO committee level, including interpreting agreements, solving and diffusing disagreements, and helping parties move toward consensus. The problem, according to Lighthizer, is that the dispute settlement system established under the 1994 agreements has morphed the WTO from a negotiating forum to a litigation forum. This results in WTO members disfavoring agreements for concessions and instead litigating at the Appellate Body level to achieve gains they otherwise would not be entitled to. The solution? Lighthizer favors engaging in negotiations with small groups of countries with commonalities who are willing to take on extra obligations – for example, in the digital trade space – and excluding other members from that process. He suggests that such a plurilateral approach will be more fruitful. Lighthizer confirmed he knows of no other way to push for WTO reform than to use the only leverage available to the United States by blocking the appointment of Appellate Body members. Absent new appointments, the Appellate Body will no longer function by the end of 2019 as it will not have enough members to render decisions.

Another widespread complaint about the current functioning of the WTO is the ability of members to self-declare themselves “developing” countries. Developing countries are exempt from certain WTO obligations and receive benefits that are not available to non-developing countries. Lighthizer explained that this is particularly problematic in the case of countries like China, Korea, and Saudi Arabia, that have become increasingly wealthy over the years yet continue to reap the benefits of their self-declared developing country status. USTR has proposed and garnered some support for proposals to address this problem, for example, disallowing a country to be designated as “developing” if it is in the OECD.

In response to a number of questions about the status of Section 232 tariffs on imports of steel and aluminum, Lighthizer stated that the tariffs are working and are necessary. There are no immediate plans to lift those tariffs, but Lighthizer confirmed they are a constant topic of discussion in the ongoing US-China negotiations and US-Canada-Mexico conversations as the push to complete USMCA continues.

China Issues regarding China were a significant focus of the senators’ questions. In response to concerns that China’s growth since 2001 (when it joined the WTO) has come at the expense of the United States and in violation of WTO agreements and rules, Lighthizer explained that the current US-China negotiations address China’s failure to abide by WTO obligations as well as overcapacity, currency manipulation, subsidies (both generally and to state-owned enterprises (SOEs), and more. Lighthizer explained further that the current structure of the agreement, which is 110 to 120 pages long, addresses technology transfer, IP protection, currency, market access, agriculture, non-tariff barriers, and enforcement of the agreement. Without question, he stated the agreement will include a commitment not to competitively devalue currency and will require increased transparency on the part of China. Lighthizer assured the Committee that enforceability is a critical aspect of the negotiations and the President will not OK an agreement absent strict enforcement provisions. Ambassador Lighthizer did not, however, provide an estimated date for when he anticipates negotiations to be completed. He further reported that China is pushing for removal of Section 301 tariffs and wants increased market access in certain sectors.

For more information on what to expect in 2019 on trade issues, check out our post reviewing the Administration’s 2019 trade policy agenda.

In a Section 301 investigation, if the USTR determines that a Chinese act, policy, or practice, (i) violates, or is inconsistent with, the provisions of, or otherwise denies benefits to the United States under, any trade agreement, or (ii) is unjustifiable and burdens or restricts United States commerce, it may take a broad range of actions to address and correct the harm.

Notably, the memorandum signed by the President does not direct the USTR to investigate any specific law, policy, or practice. Rather, it instructs the USTR to determine “whether to investigate” any Chinese laws, policies, practices, or actions. As such, there is no current timeline for the initiation of an investigation or imposition of any remedial actions. USTR Lighthizer has indicated, however, that determining whether to initiate an investigation will be one of his “highest priorities,” and he will “report back to the President as soon as possible.”