On May 31, 2019, US President Donald Trump signed a proclamation to withdraw Generalized System of Preferences(GSP) scheme on $5.6 billion exports from India, effective from June 5, 2019. GSP allows emerging countries to export goods to the US without paying duties. It offered duty-free market access to more than 3,000 items exported from India.
- India is the world’s largest beneficiary of GSP from 1970s.
- The US had announced the withdrawal of special duty benefits under the Generalized System of Preferences (GSP) on March 5, 2019, effective from first week of May. But later it was postponed as India would get new Government.
- As per a study by the Federation of Indian Export Organizations(FIEO), India’s global merchandise exports for 2018 were $324.7 billion. It included $51.4 billion to the US. But only $6.35 billion of exports from India to the US benefited from the GSP scheme. Such exports were covered under 1921 US tariff lines.
- It also removed the exemption for India from application of the safeguard measures on Crystalline Silicon Photovoltaic (CSPV) products and large residential washers effective June 5, 2019.
- India gained duty concessions of $190 million in 2017 under GSP.
Reasons for Withdrawal:
- Trade imbalance with India.
- Lack of reciprocity.
- No access to Indian market for US diary and medical device industry and market access sought for the same.
- Tariff reduction on information and communications technology products.
- Robust intellectual property rights regime.
- Issues with proposed e-commerce policy and data localization norms.
Restoration of GSP benefits:
GSP benefits can be restored if India permits U.S. companies fair and equitable access to its markets. As per US norms, a beneficiary country must meet 15 discretionary and mandatory eligibility criteria established by Congress to qualify for GSP. These include providing the US with equitable and reasonable market access, combating child labour, respecting internationally recognized worker rights and providing adequate and effective intellectual property rights protection. Earlier,