United States President Donald Trump on Monday announced his decision to withdraw India from the list of countries enjoying the Generalised System of Preferences (GSP) program on goods exported to the US.

Trump said the decision was taken as India has failed to comply with the statutory policy measures of the GSP scheme. India has been the world’s largest beneficiary of the GSP scheme since its introduction in the 1970s.

India currently enjoys tariff concession of USD 5.6 billion of US exports. If removed from the beneficiaries’ list, India would no longer be allowed to enter the United States duty-free.

In a letter to the Speaker of the House of Representatives and the President of the Senate, the US President wrote: “In accordance with Section 502(f)(2) of the Trade Act of 1974, as amended (Trade Act) (19 U.S.C 2462(f)(2)), I am providing notice of my intent to terminate the designation of India as a beneficiary developing country under the GSP.”

“I am taking this step because, after intensive engagement between the United States and the Government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India as set forth in Section 502(c)(4) of the Trade Act (19 U.S.C. 2462(c)(4)),” Trump added.

According to reports, the move to withdraw the GSP program marks a draconian action taken by Trump-led US government to reduce the US deficit with large economies. Aiming to reduce the US trade deficits, Trump many times has designated India as a ‘high tariff nation’ and called out to reduce the heavy duties that New Delhi imposes on goods imported from the United States.

A press statement released by the US Trade Representative’s Office noted, “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.”

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. Countries can also be graduated from the GSP program depending on factors related to economic development. However, apart from India, Turkey is the second country that has been removed from the list countries enjoying the GSP policy.

What is Generalized System of Preferences?

Generalised System of Preferences (GSP) program is a preferential tariff system extended by developed countries to developing countries. It is a preferential arrangement in the sense that it allows concessional low/zero tariff imports from developing countries.

GSP involves reduced/zero tariffs of eligible products exported by beneficiary countries to the markets of GSP providing countries.
However, the GSP has criteria which include the beneficiary nations in respecting arbitral awards in favour of United States citizens or corporations, combating child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection, and providing the United States with equitable and reasonable market access.
Will the move affect India?

In total India exports nearly 1,937 products to the US under GSP. According to the Washington Post, 90 percent of Indian/Brazilian exports to America face normal US tariffs and hence will remain unaffected from the exit of the GSP program.

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