India is a developed economy and ineligible for GSP benefits: US

GSP is America's oldest preferential trade scheme, which offered Indian exporters tariff-free access to the US until June, when all benefits were suspended.

The United States Trade Representative’s (USTR’s) office has classified India as a developed economy, ineligible for benefits given by Washington DC to developing countries. This is expected to stop all chances of India reclaiming its benefits under the US’ Generalized System of Preferences (GSP) scheme.

The GSP is America’s oldest preferential trade scheme, which offered Indian exporters tariff-free access to the US until June, when all benefits were suspended. The USTR considers a country’s per capita gross national income (GNI) and share of world trade to designate its level of economic development.

On the criteria of a developing country having less than 0.5 per cent share of global trade, India crossed the limit way back, according to the government’s estimate. As of 2017, India’s share in global trade was 2.1 per cent for exports and 2.6 per cent for imports. The USTR has also argued that since India, along with nations like Argentina, Brazil, Indonesia, and South Africa, is part of the G20 bloc, they can be classified as being developed despite having a per capita GNI below $12,375, according to the World Bank data.

While Commerce and Industry Minister Piyush Goyal has said India does not need development assistances like GSP hitherto provided by other nations and should be able to become competitive on its own, the issue has continued to be part of trade talks between India and the US. On the other hand, traders have pointed out Indian export remained under pressure due to increasing competition from low-cost rivals, and that surrendering GSP claims would mean handing away market share.

In 2018, the US launched an eligibility review of India’s compliance with GSP market access criteria. It concluded the country had implemented a wide array of trade barriers that create serious negative effects on commerce. Subsequently, President Donald Trump signed an executive order in November that ended duty-free status for 50 items.

India is the largest beneficiary nation under the GSP, with total benefits from tariff exemptions amounting to $260 million in 2018, according to the data from the USTR’s office.

US lawmakers urge Trump administration to reinstate GSP for India

In the letter, the lawmakers said that they have a strong desire to see GSP eligibility for India reinstated.

A bipartisan group of 44 influential lawmakers has urged the Trump administration to reinstate India's designation as a beneficiary developing nation under the key GSP trade programme as part of a potential trade deal between the two countries.

The Trump administration terminated India's designation as a beneficiary developing nation under the Generalized System of Preferences (GSP) in June.

The GSP is the largest and oldest US trade preference programme and is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.

In a letter to US Trade Representative Robert Lighthizer, the House members suggest an "early harvest" approach that "would ensure that long-sought market access gains for US industries are not held up by negotiations over remaining issues".

US President Donald Trump and Prime Minister Narendra Modi will meet on September 22 in Houston and the two sides hope to announce a potential deal on longstanding trade issues, including GSP, a media report said.

Led by Congressmen Jim Himes and Ron Estes, the letter to Lighthizer has been signed by 26 Democrats and 18 Republicans, showing the strong, bipartisan support for reinstating GSP benefits for imports from India.

"Companies are telling Congress about the American costs - both in dollars and jobs - of lost GSP eligibility for India," said Dan Anthony, executive director of the Coalition for GSP on Tuesday.

"The letter shows Congress' strong, bipartisan support for swift action to reinstate GSP for India and to help constituents that depend on two-way trade," he said.

While GSP often is seen as a benefit to foreign countries, it is American businesses and workers that have suffered most from its termination to date.

Business Standard