Why removing India from GSP matters?
US President Donald Trump has recently terminated India’s designation as one of the most beneficiary nation from its GSP scheme after determining that India has not assured US that it will provide “equitable and reasonable access to its market. Generalized system preference (GSP) is the largest and oldest scheme of US so as to provide duty free market access to other countries.
President Donald Trump in his press conference states that “I have determined that India has not assured US that it will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.”
FICCI has called for a dialogue between India and the US to find a workable solution with regard to the termination of the Generalized System of Preferences (GSP) for Indian products said Dilip Chenoy, Secretary General, FICCI.
He further said that the US decision will have short-term impact on Indo-US trade, but this should be seen in the overall context of US actions to protect its trade interests globally. If not resolved amicably it may however, impact the spirit of India-US relationship which has a huge growth potential. “India-US economic relationship needs to be seen by both the countries from a larger canvas and a long-term strategic cooperation in the areas of defense, energy and geo-strategic opportunities like the Indo Pacific,” said Dilip Chenoy.
In 2017,India was the highest beneficiary of this scheme with USD 5.7 billion dollar to US imports by providing duty free access to its market according to a Congressional Research Service report issued in January. But India claims that removing duty concessions from some product will not have impact on Indian economy because the profit was only of worth USD 190 million.
Benefits of GSP to United States
- GSP promotes economic growth and development in the developing world as well as in the scheme implemented country.
- GSP supports U.S. jobs and helps keep American companies competitive.
- GSP promotes American values.
India’s approach on its removal from GSP scheme
1. The scope of GSP scheme is limited. Only dutiable products are covered under this scheme. So, the developing countries cannot take advantage of the GSP in respect of duty free products. Export of duty free products by developing countries suffers.
2. GSP gives only marginal relief to the export of agricultural products. In many countries, agricultural products are outside the purview of GSP.
3. Even manufactured products like textiles, leather products and petroleum products are not covered under the scheme.
4. Some of the GSP schemes limit the volume of exports. Ceilings that limit the quantity of imports adversely affect the export prospects of less developed countries.
So, it was a good opinion on the part of India for not providing an assurance to US of “equitable and reasonable access” to India’s market because GSP scheme was not at par of it. Indian domestic market would suffer more by doing so. But in long run it will affect Indo-US relation. Both countries are witnessing a robust trade and the relationship is expanding to strategic sectors like oil and gas, defense and aviation. India has displayed lot of goodwill by not retaliating on steel and aluminum tariffs by the US and India expects the same cooperation by US.
By: INBA Team