GENERALIZED SYSTEM OF PREFERENCES (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     20th May 2024        
output themes

Context: Renewal of the Generalized System of Preferences (GSP) is seen as a strategic move to foster extensive trade discussions between the United States and India, potentially enhancing bilateral trade ties.


Generalized System of Preferences (GSP)

  • About: It is a preferential trade arrangement that allows developed countries to grant preferential tariffs to imports from developing countries. The largest and oldest U.S. trade preference program.
  • Act: Established by the Trade Act of 1974.
  • Objective: To promote economic growth in developing nations by providing them with easier access to the markets of wealthier countries.
  • Key features of GSP:

o Reduced or zero tariffs: GSP offers reduced or zero tariffs on imports from eligible developing countries.

o Product in GSP: GSP including agricultural and industrial goods. However, the specific products eligible for preferential treatment can vary between countries and are subject to negotiation and agreement.

o Eligibility: Eligibility for GSP benefits is often based on certain criteria, such as the level of economic development, the country's adherence to certain international agreements, and compliance with specific labour and environmental standards.

o Review and Renewal: GSP arrangements are usually subject to periodic reviews and may need to be renewed or revised. This allows participating countries to assess the impact of the program and make adjustments as needed.

  • Current India status: India had lost GSP benefits (largest beneficiary till 2017) in 2019 when former US President began introducing radical trade measures citing widening trade gap with India and China.

Significance of GSP Restoration for India:

  • Economic loss: Due to loss Generalized System of Preferences (GSP) status. India loss $5.7 billion worth of imports into the US that had duty-free status.
  • Crucial for Indian exporters: GSP restoration is crucial for Indian exporters as it provides preferential tariffs, promoting export growth and trade relations between India and the US.
  • Restoring economic cooperation: GSP restoration has been a recurring topic in India-US trade policy forum meetings, highlighting its significance in resolving trade issues and fostering economic cooperation.
Samadhaan