GENERALISED SYSTEM OF PREFERENCES


(Update: March 06, 2019)

This is a ‘follow-up update’ to the previously written article on GSP. This will keep our readers updated with recent events and at the same time provide them with an opportunity for revision. 

U.S. President Donald Trump has announced that he intends to end preferential trade terms for India under the Generalized System of Preferences (GSP) programme.

The GSP programme, accounts for some $5.6 billion of India’s exports to the U.S., making India the largest GSP beneficiary. Chemicals, gems and jewellery, engineering and textiles are among the Indian industrial sectors that benefit from the GSP.

From the U.S. perspective, a total of $21 billion in imports entered the U.S. duty-free under the GSP in 2017, of a total of $2.3 trillion in imports, according to the Congressional Research Service.

Commerce Secretary Anup Wadhawan said the impact would amount to just $190 million on exports of $5.6 billion to the U.S.


This is a follow-up ‘revision article’ on ‘Generalised Systems of Preferences’. The article has been updated with recent data and information.

India could lose a vital U.S. trade concession (under the Generalised Systems of Preferences regime), under which it enjoys zero tariffs on $5.6 billion of exports to the United States.

India is the world’s largest beneficiary of the Generalised Systems of Preferences (GSP) scheme. US president Donald Trump has repeatedly called out India for its high tariffs.

The trigger events of strained relationships:

  • The trigger for the latest downturn in trade ties was India’s new rules on e-commerce that restrict the way Amazon.com Inc. and Walmart-backed Flipkart do business in a rapidly growing Indian online market. The Indian online market is set to touch $200 billion by 2027 which is being seen as a great opportunity by companies like Amazon and Walmart.
  • A drive to force global card payments companies such as Mastercard and Visa to move their data to India
  • The imposition of higher tariffs on electronic products and smartphones.

Source: The Hindu


Quick revision:

A brief recap has been provided below for revision. If you want to read the full article visit: https://pointias.com/2019/01/22/india-u-s-gsp/

  • The Generalized System of Preferences, or GSP, is a preferential tariff system which provides for a formal system of exemption from the more general rules of the World Trade Organisation (WTO). Specifically, it is a system of exemptions from the most favoured nation principle (MFN) that obliges WTO member countries to treat the imports of all other WTO member countries no worse than they treat the imports of their “most favored” trading partner. In essence, MFN requires WTO member countries to treat imports coming from all other WTO member countries equally, that is, by imposing equal tariffs on them. GSP exempts WTO member countries from MFN for the purpose of lowering tariffs for the least developed countries, without also lowering tariffs for rich countries.
  • India is a beneficiary under the India-US GSP regime. Under the India-US GSP regime,  US allows imports of select products from a host of poor or developing countries, including India, at concessional duties. However, recently, US has been demanding more market access by India using the Indian US GSP regime as a leverage.
  • GSP allows Indian exporters a certain competitive edge and furthers the development of the country’s export base. It also allows India to integrate with global value chains (GVC) and hence, with global markets. These advantages provide opportunities for small enterprises and help in the overall livelihood creation endeavour in India.
  • However, if India loses its trade concessions under GSP, it will impact India adversely.

This was a brief recap and has been provided here for revision. If you want to read the full article visit: https://pointias.com/2019/01/22/india-u-s-gsp/

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