By admin       2019-06-04

A day after India’s new Cabinet was sworn in on May 30, President Donald Trump announced that the United States (US) was ending India's designation as a beneficiary developing nation under the generalised system of preference (GSP) scheme after concluding that India had failed to assure offering “equitable and reasonable access to its markets." India’s status ends on June 5.Started on January 1, 1976, GSP—the largest and oldest US trade preference programme—allows duty-free entry for over 3,000 products from designated nations. India has been the biggest beneficiary of the scheme and accounted for goods worth $5.7 billion—over a quarter of the goods that got duty-free access into the US—in 2017.India’s top exports to the US under GSP in 2017 included motor vehicle parts, ferro alloys, precious metal jewellery, building stone, insulated cables, leather products, garment (marginal) and wires. Out of $36 billion of such exports—as only $5.7 billion worth will be affected, the US trade deficit with India will be marginally impacted. India’s trade surplus for merchandise goods with the US is around $18–19 billion. Also, most of the exports are of intermediate goods not produced in the US.In March, the office of the US Trade Representative (USTR) notified the US Congress and India that Indian exports did not qualify for GSP benefits under its updated, stricter eligibility criteria. India unsuccessfully pushed its case during the 60-day notice period, which expired on May 3.The reason behind the US announcement lay in India not accepting several US demands on the trade front, including softening of price caps on medical equipment, removal of specific mandatory certifications for dairy product exports, removal of import duties on cellular phones and roll-back of certain changes made in the e-commerce policy that imposed several restrictions on foreign players sourcing goods from vendors. While GSP withdrawal affects $6.35 billion worth of exports from India, exporters stand to lose net benefits worth $260 million annually.A country must meet 15 discretionary and mandatory eligibility criteria decided by the US Congress to qualify for GSP. These include providing the US with equitable and reasonable market access, respecting internationally-recognised workers’ rights, combating child labour and providing adequate and effective intellectual property rights protection. However, reinstatement of GSP benefits is conditional.While some in India view the decision as President Trump’s cue to India to do more to show it is an US ally, many perceive that as both a challenge on the economic front and a diplomatic opportunity.

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