Prelims level : Economics – Growth Mains level : GS3- Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
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Why in news:

  • U.S. Commerce Secretary had told Prime Minister Narendra Modi in that the U.S. Trade Representative (USTR) would hold off on making a final decision on India’s eligibility for the Generalized System of Preferences (GSP) programme until after the general election.


  • comparisons between the U.S. and India’s levels of trade protection are made saying the U.S. was the least protectionist among major countries and had a trade deficit to prove it.
  • The U.S. has zero tariffs on 61% of the total value of our total import. India’s average applied tariff rate at 13.8% remains the highest of any major world economy. Examples of high Indian tariff rates, including in autos, alcoholic beverages and motorcycles, reiterating some of the public messaging are also pointed out. The U.S. is India’s largest export destination, while India remained the U.S.’s 13th largest export market despite its large population and this imbalance is due importantly to overly restrictive market access barriers.

Generalised System of Preferences (GSP)

  • It is a preferential arrangement in the sense that it allows concessional low/zero tariff imports from developing countries to developed countries (also known as preference receiving countries or beneficiary countries).
  • It involves reduced/zero tariffs of eligible products exported by beneficiary countries to the markets of GSP providing countries.
  • The US has a strong GSP regime for developing countries since its launch in 1976, by the Trade Act of 1974.
  • The GSP program has effective dates which are specified in relevant legislation, thereby requiring periodical reauthorization in order to remain in effect.

GSP at Global Level

  • GSP instituted in 1971 under the aegis of UNCTAD, has contributed over the years to creating an enabling trading environment for developing countries.
  • The following 13 countries grant GSP preferences: Australia, Belarus, Canada, the European Union, Iceland, Japan, Kazakhstan, New Zealand, Norway, the Russian Federation, Switzerland, Turkey and the United States of America.
  • Following the WTO Hong Kong Ministerial Decision of UNCTAD in 2005 the members agreed that developed countries and developing countries in a position to do so would grant duty-free and quota-free market access for exports of Least Developed Countries (LDC). Subsequent ministerial decisions also reaffirmed the continued importance of this issue for LDCs’ trade and development prospects.
  • The provision and utilization of trade preferences is a key goal the Istanbul Program of Actions adopted at the UN LDC IV in 2013, as further reaffirmed in SDGs Goal 17.
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