Termination of GSP status of India

Question: Which country provides GSP status to other countries in trade from which India was removed recently?
(a) European Union
(b) United Kingdom
(c) United States
(d) China
Answer: (c)
Related facts:

  • US President Donald Trump announced the exit of India from the Generalised System of Preference (GSP) list with effect from 5th June, 2019. All the benefits availed by the Indian traders under this system will not be in effect and India will be treated as a general nation for trade.
  • India is the largest beneficiary of this scheme since its inclusion. US President made this move after finding India unable to provide market to US firms.
  • Donald Trump announced on 4th March, 2019 that the US intends to terminate India’s designations as a beneficiary developing country under the GSP programme. The 60-day notice period ended on May 3.
  • India had offered the U.S. a meaningful package earlier that covered U.S. concerns, but this was not acceptable to the U.S
  • The benefits, however, could possibly be reinstated subject to India and the U.S. reaching an agreement.

Generalised System of Preference (GSP) Program:

  • The Generalized System of Preference (GSP) is the largest and oldest US trade preference programme. It is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary developing countries.
  • Under the GSP programme, nearly 2,000 products including auto components and textile materials can enter the US duty-free if the beneficiary developing countries meet the eligibility criteria established by Congress.
  • The GSP criteria include, among others, respecting arbitral awards in favor of the US citizens or corporations, combating child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection, and providing the US with equitable and reasonable market access.

India as the beneficiary:

  • India was the largest beneficiary of the programme in 2018 with USD 6.3 billion in imports to the US given duty-free status.
  • It included 11% of all merchandise imported from India.
  • Trump’s decision will cost American businesses over USD 300 million in additional tariffs every year.

Possible impact:

  • The loss estimated by Indian officials due to this decision is around $ 190 million.
  • India had $ 5.6 billion export under the GSP category.
  • Industries such as gem & jewellery, leather & processed foods are likely to get impacted with this decision.

Links:
https://in.reuters.com/article/usa-trade-india/exclusive-u-s-considers-withdrawal-of-zero-tariffs-for-india-sources-idINKCN1PX0ZI
https://www.bbc.com/news/world-asia-india-48482988
https://www.thehindu.com/todays-paper/trump-ends-concessions-for-indian-exports-under-gsp/article27403812.ece
https://www.thehindu.com/news/international/us-president-donald-trump-terminates-preferential-trade-status-for-india-under-gsp/article27398125.ece
http://ddnews.gov.in/international-business/us-president-donald-trump-terminates-preferential-trade-status-india-under

https://www.thehindubusinessline.com/economy/trump-terminates-preferential-trade-status-for-india-under-gsp/article27398318.ece