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WHAT COULD HAVE CAUSED THIS?
- 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 online market set to touch $200 billion by 2027.
- That, coming on top of a drive to force global card payments companies such as Mastercard and Visa to move their data to India and the imposition of higher tariffs on electronic products and smartphones, left a broader trade package the two sides were working on through last year in tatters.
WHAT IS GSP?
- Generalized System of Preferences (GSP) is a preferential tariff system extended by developed countries to developing countries (also known as preference receiving countries or beneficiary countries). It is a preferential arrangement in the sense that it allows concessional low/zero tariff imports from developing countries.
GSP EXPLAINED
- Developed countries including the US, EU, UK, Japan etc., gives GSPs to imports from developing countries. GSP involves reduced/zero tariffs of eligible products exported by beneficiary countries to the markets of GSP providing countries. The US has a strong GSP regime for developing countries since its launch in 1976, by the Trade Act of 1974. In the past, thousands of products were imported from nearly 120 designated beneficiary countries and territories.
WHAT IS US GSP?
- The GSP, the largest and oldest US trade preference programme, allows duty-free entry for over 3,000 products from designated beneficiary countries. It was instituted on January 1, 1976, and authorised under the US Trade Act of 1974. India has been the biggest beneficiary of the GSP regime and accounted for over a quarter of the goods that got dutyfree access into the US in 2017. Exports to the US from India under GSP — at $5.58 billion — were over 12% of India’s total goods exports of $45.2 billion to the US that year. The US goods trade deficit with India was $22.9 billion in 2017.
HOW HAS GSP BENEFITTED INDIA?
- The benefits amount to a saving of around $200 million for India, according to the latest commerce ministry data. India was getting a tariff preference on 5,111 products, or what are called tariff lines, out of 18,770 tariff lines in the US. However, the tariff advantage was 4 per cent and above on only 2,165 tariff lines.
WHAT WILL BE THE IMPACT?
- GSP is meant largely for those export-oriented sectors that are labour-intensive. So, if it is withdrawn, it will impact jobs. The US import price of most chemicals products that constituted a large chunk of India’s exports is expected to increase by about 5 per cent.
IS IT FINAL?
- The Office of the US Trade Representative (USTR) has said that it is keeping a window of 60 days open to review whether or not India should be given GSP. India has sought talks with the US to avoid the withdrawal of the trade benefits under the GSP. India has offered a trade package to the US which promises of about Rs 35,000 crore annually in oil and gas imports from the US and another Rs 1,00,000 lakh crore in defence orders in the coming years
MANY COUNTRIES GIVE GSP TO OTHER COUNTRIES
- In the textile sector, in which Pakistan is the sole beneficiary of EU’s GSP
 
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