All you need to know about the Generalized System of Preference (GSP)
Guest Blog by Mohit Negi
USA has announced that it intends to terminate India’s designation as a beneficiary of its generalized system of preferences (GSP).
GENERALIZED SYSTEM OF PREFERENCE
Generalized System of Preference (GSP) is a prefer tariff system extended by the developed countries to developing countries.
USA and GSP
USA has a strong GSP regime since its launch in 1976 under US trade act of 1974 and India has been one of the biggest beneficiaries of this, however, not only the US but other developed countries like U.K, Japan and European Union (E.U) also have GSP imports from the developing countries.
Why the USA has taken the step
Recently India has been making policies to make its economy, social structure strong these policies have been impacting American business firms i.e.
A) INDIAN E-COMMERCE POLICY
(To protect the Indian MSME and Indian business from MNC’s) this policy is estimated the worth of $200 billion by 2027 and it has affected American giants like AMAZON, Wallmart backed FLIPCART and others too.
B) CAPPING MEDICAL PRICES
This policy of capping started for cardiac stunts and knee implants over 70% and 60% this impacted a medical business like Abbott, Medtronic, Boston Scientific and Stryker
C) DAIRY PRODUCTS
India is not purchasing any dairy product from the animals been fed blood meals as it is non-negotiable from the cultural standpoint this policy has also affected American business
Impacts of these steps on INDIA
India gets GSP over its 3000 products which it export to the USA according to WTO data this will affect India $5.8 billion out the total exports done with the USA of $42 billion.
The products which the India exports to the USA are a labour extensive industry for gems, jewellery, automobile accessories this includes a lot of labour so their jobs will be affected.
WAY FORWARD TO IT
The department of US Trade Representative has said to give a cap of 60 days to India after which they will see whether or not to INDIA should be given GSP
Meanwhile, India has sought talks with the US to avoid GSP, moreover, India has offered trade package offer of Rs 35000 crore to buy petroleum products and Rs 100, 00 lakh crore on defence products with a viewpoint to cover trade deficit with the USA
However the relation of INDIA
The USA is not going to be hampered by this step as both are big economies and big countries and both share a common viewpoint and that is a different approach for different issues