The U.S. could possibly remove India from the Generalised System of Preferences (GSP) list.
What is the Generalised System of Preferences?
- The GSP is a U.S. trade program designed to promote economic growth in the developing world.
- GSP was instituted in 1976 by the Trade Act of 1974.
- It provides preferential duty-free entry for up to 4,800 products from more than 120 designated beneficiary countries and territories.
- It was extended to India in 1976, under which India is able to export about 2,000 product lines to the U.S. under zero tariff.
- The revocation of the GSP will have a significant impact on Indian exporters.
What is the U.S.’s rationale?
- The proposal comes in a series of measures taken by the Trump administration against India to reduce U.S.’s trade deficit with India.
- President Donald Trump is concerned with the “unequal tariffs” from India, as the trade relationship is in favour of India.
- Notably, Indian exports to the U.S. in 2017-18 stood at $47.9 billion, while imports were $26.7 billion.
- The U.S. has been imposing tariffs on several Indian products since March 2018.
- The USTR (U.S. Trade Representative) also parallelly began a review of India’s GSP status.
- This was after receiving complaints of trade barriers from India, from the dairy industry and manufacturers of medical devices.
- India’s decisions on data localisation for all companies operating in India and tightening norms for FDI in e-commerce have aggravated the situation.
- Recently, the U.S. withdrew GSP status on at least 50 Indian products.
What was India’s response?
- In retaliation to US restrictions, India earlier proposed tariffs of about $235 million on 29 American goods.
- But it has put off implementing these, five times in the past year, in the hope that a negotiated trade settlement will come through.
- The latest deadline on implementation of the proposals expires on March 1, 2019.
- Despite several rounds of talks between officials over the past few months, there is no breakthrough.
- Besides, India has also attempted to address the trade deficit, with purchase of American oil, energy and aircraft.
What lies ahead?
- Both sides should work towards calling a halt to trade hostilities and speed up efforts for a comprehensive trade “package”.
- This would address the concerns of both sides much better than the measures to match each concern product by product.
- India must be aware of the larger, global picture about U.S.-China trade war issues as well.
- If a trade deal with the U.S. is reached, India could be the biggest beneficiary of business deals lost by China.