GSP
- INTERNATIONAL
News:
India-US trade policy
meeting starts today: GSP, laptop import monitoring system on table
What's
in the news?
●
India and the US are set to take up a
number of sticky trade issues — ranging from New Delhi’s long-pending demand
seeking the restoration of Generalised System of Preferences (GSP) that was
revoked under former US President Donald Trump to Washington’s objection to
India’s laptop import monitoring system — at the trade policy forum meet.
Key
takeaways:
●
India
had lost GSP benefits in 2019 when former US President
Donald Trump began introducing radical trade measures citing widening trade gap with India and
China.
Why
is the trade policy forum meeting crucial?
●
The
US is India’s single largest trade partner and the only large economy where
India exports more than it imports.
●
At a time when goods exports are slowing
in the West due to the Russia-Ukraine war, India predominantly depends on the
US demand for export earnings.
●
It is also banking on the US-led Indo-Pacific Economic Framework for
Prosperity (IPEF) trade pact to counter China’s mammoth influence on trade
in Asia.
●
With the US firms increasingly adopting
China plus one policy and the ongoing supply chain reset, closer trade ties
with the US could help India attract
more foreign direct investment (FDI).
●
Moreover, in the absence of a free trade
agreement (FTA) with the US, such trade policy forum meetings are among the few
platforms to resolve trade tensions and push for tangible export growth.
Generalized
System of Preferences (GSP):
●
The Generalized System of Preferences
(GSP) trade privilege for India was
withdrawn by the Trump administration in June 2019.
●
India has been actively urging the Biden
Administration to reinstate this trade privilege.
●
It is a U.S. trade program initiated on
January 1, 1976, under the Trade Act of 1974.
●
GSP is a preferential trade program that
allows certain developing countries to
pay fewer or zero duties on their exports to developed countries.
Aim:
●
To promote
economic growth in the beneficiary countries by facilitating their exports.
Objectives
of GSP:
●
To provide
development support to less affluent countries by promoting their exports
to developed nations.
●
It facilitates sustainable development by aiding beneficiary countries in
increasing and diversifying their trade with the United States.
Features:
1.
Reduces tariffs and duty-free access:
●
Under GSP, eligible products from
beneficiary countries receive preferential treatment in terms of reduced
tariffs or duty-free access to the markets of the developed countries offering
GSP privileges.
2.
Non-Reciprocal basis and concerns:
●
GSP has historically been granted on a
non-reciprocal basis, supporting development in beneficiary countries.
●
However, the U.S. has linked GSP with
market access and tariff reduction, deviating from its non-reciprocal nature.
Significance
of GSP:
●
Indian exporters indirectly benefit from
GSP through reduced tariffs or duty-free entry granted to eligible Indian
products.
●
The lowered import duty enhances the
competitiveness of Indian products in the U.S. market, benefiting both new and
established exporters.
●
GSP serves as a tool for market
penetration and allows exporters to improve market share and profit margins in
the donor country.
●
India was the largest beneficiary of GSP
status in 2017 with $5.7 billion worth
of imports into the US given duty-free status.