USA terminated preferential trade status for India under GSP. How the termination will affect India and how India can prepare for this?

Published: June 1, 2019

The Generalized System of Preferences is a U.S. trade program. It was designed to promote economic growth in the developing world by providing preferential duty-free entry. 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 their trade with the United States.
Benefits of GSP:

  • Reduced tariff or duty free entry of eligible Indian products
  • Reduction or removal of import duty on an Indian product makes it�more competitive to the importer
  • Helps new exporters to penetrate a market and established exporters to increase their market share

Impact of GSP Termination on India:

  • The GSP removal will leave a reasonable impact on India as the country enjoyed preferential tariff on exports worth of nearly $ 5. 6 billion under the GSP route out in 2017-18
  • The loss may even exceed 10%
  • The price of goods from India will not be the same as it was before the GSP was removed. Consumers of those products in the U.S. would move to producers that enjoy the GSP benefits and hence are able to offer lower prices
  • India is the 11th largest trade surplus country for the US and India enjoyed an annual trade surplus of $ 21 bn in 2017-18

GSP provide opportunities for many of the world�s poorest countries to use trade to grow their economies and climb out of poverty. The government of India must offer fiscal help to the affected sectors. Helping such sectors would also protect jobs especially when job creation is at a low.
 

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