UPSC MAINS 2019 : US terminates preferential trade status for India under GSP

US terminates preferential trade status for India under GSP

Topic : US terminates preferential trade status for India under GSP

Topic in Syllabus : General Studies Paper 2: International Affairs

 

Context

US 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.”

 

Background:

  • 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.
  • The Trump administration has prioritised working with the Government of India to ensure that US companies have a level-playing field, a senior State Department official told.
  • 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 $5.7 billion in imports to the US given duty-free status and Turkey the fifth largest with $1.7 billion in covered imports.
  • India’s global merchandise exports for 2018 were $324.7 billion, of which $51.4 billion were to the US. However, only $6.35 billion of exports from India to the US benefited from the GSP scheme.

 

Reasons behind  Termination

  • India failed to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors.
  • The USTR lamented that despite intensive engagement, “India has failed to take the necessary steps to meet the GSP criterion.

 

What is GSP

 

Sample Question

How Important is GSP for developing countries like India? Discuss the effects of termination of preferential trade status On Indian economic growth.