Context:

• The US has announced that it intends to “terminate” India’s designation as a beneficiary of its Generalized System of Preferences (GSP).

What is GSP programme:

• The GSP, the largest and oldest US trade preference programme, allows duty-free entry for over 3,000 products from designated beneficiary countries. It was instituted on January 1, 1976, and authorised under the US Trade Act of 1974.
• India has been the biggest beneficiary of the GSP regime and accounted for over a quarter of the goods that got duty-free access into the US in 2017.
• Exports to the US from India under GSP — at $5.58 billion — were over 12% of India’s total goods exports of $45.2 billion to the US that year. The US goods trade deficit with India was $22.9 billion in 2017.

Indian Exports under GSP:

Possible Impact:

• India’s Department of Commerce feels the impact is “minimal”, given that Indian exporters were only receiving duty-free benefits of $190 million on the country’s overall GSP-related trade of $5.6 billion.
• Some experts feel the move will not have a major impact on India also because it has been diversifying its market in the Latin American and the African region and its trade with countries of the Global South has also been expanding at a “very competitive pace”.
• At the same time, the move could hit Indian exporters if it gives an edge to competitors in its top export categories to the US. The amount of price advantage India has versus competitor countries and what happens to their GSP privileges will determine the extent to which India’s exports will be impacted