1-Jun-2019: U.S. President Donald Trump terminates preferential trade status for India under GSP

President Donald Trump has terminated India's designation as a beneficiary developing nation under the key GSP trade programme after determining that it has not assured the US that it will provide "equitable and reasonable access" to its markets.

The Generalized System of Preference (GSP) is the largest and oldest US trade preference programme and is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.

On March 4, Donald Trump announced 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.

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. India was the largest beneficiary of the programme in 2017 with USD 5.7 billion in imports to the US given duty-free status and Turkey the fifth largest with USD 1.7 billion in covered imports.

The GSP criteria include, among others, respecting arbitral awards in favour 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.

Trump's decision will cost American businesses over USD 300 million in additional tariffs every year. He also said the Trump administration made the decision in the face of opposition from members of the Congress and hundreds of American businesses that have called for continued GSP eligibility for India.

The Trump administration argues that New Delhi has failed to assure America that it will provide equitable and reasonable access to its markets in numerous sectors. Meanwhile, India had said that the US government's move to withdraw duty concessions on certain products under the GSP programme will not have a significant impact on exports to America as the benefits were only about USD 190 million annually.

3-May-2019: 25 US lawmakers urge authorities not to terminate GSP benefits to India
A group of 25 influential American lawmakers has urged the US Trade Representative not to terminate the GSP programme with India after the expiry of the 60-day notice on Friday, saying the country's companies seeking to expand their exports to India could be affected.

The Generalized System of Preference (GSP) is the largest and oldest US trade preference programme and is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.

On March 4, President Donald Trump announced that the US intends to terminate India's designations as a beneficiary developing country under the GSP programme. The 60-day notice period ends on May 3.

On the eve of the end of the notice period, the 25 US lawmakers made a last-ditch effort to convince the Trump administration from going ahead with its decision.

The 25 members of the US House of Representatives in a passionate letter urged US Trade Representative Robert Lighthizer to continue negotiating a deal that protects and promotes jobs that rely on trade – both imports and exports – with India. They argued that terminating GSP for India would hurt American companies seeking to expand their exports to India.

India's termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors, Trump had said in a letter to Congress. He was determined that New Delhi had "not assured" the US that it would "provide equitable and reasonable access" to the markets of India.

The USTR through a simple notification in federal register can formally terminate GSP benefits to India. Expressing concern over such a move, the lawmakers said that no party — in the United States or India — would benefit from terminating GSP benefits.

American companies that rely on duty-free treatment for India under the GSP will pay hundreds of millions of dollars annually in new taxes. In the past, even temporary lapses in such benefits have caused companies to lay off workers, cut salaries and benefits, and delay or cancel job-creating investments in the United States.

Terminating the GSP for India similarly would hurt, not help, companies seeking to expand their exports to India. Any progress made toward resolving issues over the last year of GSP negotiations seems unlikely to take effect if India is removed from the programme.

4-Mar-2019: United States Will Terminate GSP Designation of India and Turkey

At the direction of President Donald J. Trump, U.S. Trade Representative Robert Lighthizer announced today that the United States intends to terminate India’s and Turkey’s designations as beneficiary developing countries under the Generalized System of Preferences (GSP) program because they no longer comply with the statutory eligibility criteria.

India’s termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors. Turkey’s termination from GSP follows a finding that it is sufficiently economically developed and should no longer benefit from preferential market access to the United States market.

By statute, these changes may not take effect until at least 60 days after the notifications to Congress and the governments of India and Turkey, and will be enacted by a Presidential Proclamation.

Background: Under the United States GSP program, certain products can enter the United States duty-free if beneficiary developing countries meet the eligibility criteria established by Congress.  GSP criteria include, among others, respecting arbitral awards in favor of United States citizens or corporations, combating child labor, respecting internationally recognized worker rights, providing adequate and effective intellectual property protection, and providing the United States with equitable and reasonable market access. Countries can also be graduated from the GSP program depending on factors related to economic development.

India: The United States launched an eligibility review of India’s compliance with the GSP market access criterion in April 2018. India has implemented a wide array of trade barriers that create serious negative effects on United States commerce. Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion.

Turkey: The United States designated Turkey as a GSP beneficiary developing country in 1975. An increase in Gross National Income (GNI) per capita, declining poverty rates, and export diversification, by trading partner and by sector, are evidence of Turkey’s higher level of economic development.

9-Feb-2019: US may deny zero tariff benefit for Indian exports

India could lose a vital U.S. trade concession, under which it enjoys zero tariffs on $5.6 billion of exports to the United States, amid a widening dispute over its trade and investment policies. A move to withdraw the Generalised System of Preferences (GSP) from India, the world’s largest beneficiary of a scheme that has been in force since the 1970s, would be the strongest punitive action since President Donald Trump took office in 2017 vowing to reduce the U.S. deficit with large economies.

Trump has repeatedly called out India for its high tariffs. Indian Prime Minister Narendra Modi has courted foreign investment as part of his Make-in-India campaign to turn India into a manufacturing hub and deliver jobs to the millions of youth entering the workforce.

Trump, for his part, has pushed for U.S. manufacturing to return home as part of his Make America Great Again campaign. The trigger for the latest downturn in trade ties was India’s new rules on e-commerce that restrict the way Amazon.com Inc and Walmart-backed Flipkart do business in a rapidly growing online market set to touch $200 billion by 2027.

That, coming on top of a drive to force global card payments companies such as Mastercard and Visa to move their data to India and the imposition of higher tariffs on electronic products and smartphones, left a broader trade package the two sides were working on through last year in tatters. The GSP was tied to the trade package and since that deal had slipped further away, the United States was considering withdrawing or scaling back the preferential arrangement.

Background: The Generalized System of Preferences (GSP) is a U.S. trade program designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories.

What is the objective of GSP?

The objective of GSP was to give development support to poor countries by promoting exports from them into the developed countries. GSP promotes sustainable development in beneficiary countries by helping these countries to increase and diversify their trade with the United States.

GSP provide opportunities for many of the world’s poorest countries to use trade to grow their economies and climb out of poverty.

Benefits of GSP:

1. Indian exporters benefit indirectly – through the benefit that accrues to the importer by way of reduced tariff or duty free entry of eligible Indian products.
2. Reduction or removal of import duty on an Indian product makes it more competitive to the importer – other things (e.g. quality) being equal.
3. This tariff preference helps new exporters to penetrate a market and established exporters to increase their market share and to improve upon the profit margins, in the donor country.