The federal government of the United States plans to eliminate the Generalized System of Preferences (GSP) for Indian products, a move that could affect Indian companies.
> GSP allows India to export certain kinds of goods to US markets duty free, thereby making them more attractive to the US market for retailers and buyers.
> India's new e-commerce regulations, which limit the way Amazon and Walmart-backed Flipkart do business in a rapidly rising online market set to hit $200 billion by 2027, are the cause for the recent downturn in trade ties.
> In the midst of an expanding conflict over its trade and investment policies, India could lose a crucial US trade concession under which it enjoys zero tariffs on $5.6 billion of exports to the United States.
> India is the largest recipient in the world of a scheme in operation since the 1970s.
What is a Generalized System of Preference (GSP)?
> It is a preferential agreement that allows concessional low / zero tariff imports to developed countries from developing countries.
> It involves reduced/zero tariffs of eligible products exported by beneficiary countries to the markets of GSP providing countries.
> Since its implementation in 1976, by the Trade Act of 1974, the US has had a strict GSP regime for developing countries.
> The GSP program has effective dates which are specified in relevant legislation, thereby requiring periodical reauthorization in order to remain in effect.
Global level GSP:
> Over the years, GSP, founded in 1971 under the auspices of UNCTAD, has helped to create an enabling trading climate for developing countries.
> GSP preferences are given by the following 13 countries: Australia, Belarus, Canada, the European Union, Iceland, Japan, Kazakhstan, New Zealand, Norway , Switzerland, the Russian Federation, Turkey and the United States of America.
> Following the WTO Hong Kong Ministerial Decision of UNCTAD in 2005 the members agreed that developed countries and developing countries in a position to do so would grant duty-free and quota-free market access for exports of Least Developed Countries(LDC).
> The ministerial decisions subsequently reaffirmed the continued relevance of this issue for the trade and growth prospects of the LDCs.
> A primary priority of the Istanbul Program of Actions implemented at UN LDC IV in 2013 is the provision and utilisation of trade preferences, as further reaffirmed in SDG Target 17.
Under the GSP, who are the beneficiaries?
> About 120 developing countries are the beneficiaries of the GSP. In terms of export volume realised under GSP, India and Brazil were the major beneficiaries.
> GSP incentives are ineligible for imports from China and certain developing countries. The beneficiaries and the goods protected by the scheme are periodically updated.
> According to the website of the US Trade Representative Office, by helping these countries to increase and diversify their trade with the United States, GSP facilitates sustainable development in beneficiary countries.
What are the classes of goods protected under GSP?
> The products protected by the GSP are primarily agricultural products, including, though not limited to, animal husbandry, meat and fish and craft products. In general, these products are specialised products for developing countries.
Effect on India of GSP withdrawal:
> India exports almost 50 of the 94 goods for which GSP benefits are discontinued. The GSP removal will leave a reasonable impact on India as the country enjoyed preferential tariff on exports worth of nearly $ 5.6 billion under the GSP route out of the total exports of $48 bn in 2017-18.
> India exports, under GSP, nearly 1,937 products to the USA.
> GSP removal indicates that the US has a tough trade position, particularly for countries like India that have benefited a great deal from the scheme.