What is GSP status; how US withdrawal of zero duty import benefit hurts India

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Updated: March 6, 2019 1:43:17 PM

The withdrawal will become applicable after 60 days of the issue of a notification on the same and would affect India-US trade.

US President Donald Trump on Monday said that he wants to withdraw India’s GSP benefit status due to lack of reciprocity, putting at risk the duty-free import of thousands of goods from India into the US. The move might have an affect on India-US trade, however, its impact on Indian exports would be ‘minimal’ said the commerce secretary Anup Wadhwan.

The government had been engaged in discussions to arrive at a solution on the issues raised by the US,, including those on sectors such as medical devices, dairy products and the IT sector, India said on Tuesday.

The withdrawal will become applicable after 60 days of the issue of a notification on the same and would affect India-US trade. Donald Trump said in a letter that India had not assured the US to provide equitable and reasonable access to Indian markets, in return for GSP benefit status.

GSP (Generalised System of Preferences) was introduced in 1976 as a US trade preference programme to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries — both developing and developed.

“GSP provide opportunities for many of the world’s poorest countries to use trade to grow their economies and climb out of poverty,” according to the US Trade Representative Office website (USTR).

The programme allows export of 1900 products from sectors such as chemicals and engineering worth $5.6 billion from India to enter the US duty free, commerce secretary Anup Wadhawan said. The other products exported by India are iron or steel, furniture, aluminium and electrical machinery.

India exports goods worth $5.6 billion under the GSP, and the duty benefit is only $190 million annually, said Wadhwan .

The high tariffs from India has been a contentious issue between the two countries in the past few years.The US demands for relaxation in norms for exports of medical devices and dairy products, which India has denied. This has led Donald Trump, who has resolved to reduce the trade deficit of the US with other countries, to announce the likelihood of withdrawal of the GSP status from India .The US goods and services trade deficit with India was $27.3 billion in 2017, according to USTR. The withdrawal of the status may reduce this gap.

The government would continue to engage in ‘internal’ discussion to decide whether India should impose retaliatory tariffs on products like steel, said the commerce secretary.

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