The Generalized System of Preference (GSP) is the oldest and also the largest U.S. trade preference programme and is intended to push economic development by permitting rising countries to export product to the U.S. while not paying duties.

Under the GSP programme,  if the beneficiary developing countries meet the eligibility criteria established by Congress, nearly 2000 merchandise together with machine parts and textile materials will enter U.S. non-taxable.

India was the biggest beneficiary of the programme in 2017 with USD 5.7 billion in imports to the U.S. given non-taxable standing.

The GSP criteria include: respecting arbitrational awards in favour of U.S. citizens and companies, combating child labour, respecting internationally recognised employee rights, providing adequate and effective property protection, and providing the U.S. with just and affordable market access.

Countries may also be graduated from the GSP programme reckoning on factors associated with the country’s economic development.

The Trump administration argues that India has failed to assure America that it’ll give equitable and reasonable access to its markets. The U.S. has proclaimed the withdrawal of special duty edges under GSP on March 5 and was to return into force from the first week of May. However, Washington set to hold over the implementation of its call till May 23, When India gets a new government.

“I have determined that India has not assured the U.S. that it’ll give equitable and reasonable access to its markets. Hence, it’s applicable to terminate India as a beneficiary developing country effectively from June 5, 2019,” Trump aforesaid in a very proclamation on Friday, ignoring the plea created by many prime American lawmakers because it can cost American businesses over USD three hundred million in further tariffs each year.

Meanwhile, India had aforesaid that the US government’s move to withdraw duty concessions on certain merchandise below the GSP programme won’t have a major impact on exports to America.

Commerce Secretary Anup Wadhawan in March aforesaid despite the very fact that India was functioning on an “extensive and reasonable” trade package, the U.S. set to go ahead with its call to scrap the preferential trade benefit. The package was covering all issues associated with bilateral trade with the U.S. on sectors including medical devices, farm merchandise and agricultural product, he aforesaid adding that India couldn’t negotiate issues regarding interests of public health care.

Without GSP edges American small businesses face a replacement tax leading to job losses, off investments and cost will increase for customers. Thus, there’s no winner from this call of Donald Trump. American importers can pay a lot of, whereas some American exporters can still face current market access barriers in India and others, together with farmers, are very likely to be subject to a replacement retaliatory tariff.

Impact

The administration aforesaid that it would additionally, apply to India tariffs on solar panels and washers that were proclaimed last year, suspending an exemption it had granted to certain developing countries.

The bilateral trade between India and the US stood at $74.5 billion in 2017-18, up 15.5 per cent from $64.5 billion in the previous fiscal. However, the numbers are skewed in India’s favour. For instance, India reportedly imported items worth $26.3 billion from the US in FY19 (April-December) but posted a total export of $38.8 billion. Commerce Secretary Anup Wadhawan had earlier said that the GSP withdrawal would not have a significant impact on India’s exports to the US since the duty benefit, or savings on import tariffs amounted to only $190 million annually.

Moreover, Monideepa M Mukherjee, a spokeswoman for India’s commerce ministry, had also told Associated Press that GSP was in any case “meant for least-developed countries, and India has graduated out of that”. The Federation of Indian Export Organisations (FIEO) also believes that India’s exports to the US will remain unaffected by Trump’s latest move since it will only have a marginal impact on a few domestic sectors such as processed food, leather, plastic, building material and tiles, engineering goods, and hand tools, among others.

The measure can hit some Indian exporters of merchandise like textiles, jewellery, machine elements and agricultural merchandise.